Exhibit 2.1

 

CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT

 

by and among

 

ANTERO RESOURCES CORPORATION,

 

ANTERO MIDSTREAM PARTNERS LP

 

and

 

ANTERO TREATMENT LLC

 

dated as of

 

September 17, 2015

 

 

TABLE OF CONTENTS

 

ARTICLE I                                 DEFINITIONS		2
ARTICLE II                            CONTRIBUTIONS, CONVEYANCES, ACKNOWLEDGMENTS AND DISTRIBUTIONS		12
	2.1 Contributions	12
	2.2 Consideration	12
	2.3 Earn-Out Payments	13
	2.4 Transfer Taxes	16
ARTICLE III                       REPRESENTATIONS AND WARRANTIES OF ANTERO		16
	3.1 Organization and Existence	16
	3.2 Authority and Approval; Enforceability	17
	3.3 No Conflict	17
	3.4 Consents	18
	3.5 Laws and Regulations; Litigation	18
	3.6 Environmental Matters	19
	3.7 Water Interests	19
	3.8 Water Assets	19
	3.9 Permits	20
	3.10 Insurance	20
	3.11 Brokerage Arrangements	21
	3.12 Investment	21
	3.13 Taxes	21
	3.14 Financial Statements	22
	3.15 Material Contracts	23
	3.16 No Adverse Changes	23
	3.17 Employees	23
	3.18 Investment Company Act	23
	3.19 No Other Representations or Warranties; Schedules	23
ARTICLE IV                        REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP ACQUIRING ENTITIES		24
	4.1 Organization and Existence	24
	4.2 Authority and Approval; Enforceability	24
	4.3 No Conflict	24
	4.4 Brokerage Arrangements	25
	4.5 New Common Units	25
	4.6 Investment	25
	4.7 No Other Representations or Warranties; Schedules	26
ARTICLE V                             COVENANTS, ETC.		26
	5.1 Conduct of the Business	26
	5.2 Financial Statements; Financing Cooperation	27
	5.3 Independent Investigation	27
	5.4 Post-Closing Receivables and Payments	28

 

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	5.5 Further Assurances	28
	5.6 NYSE Listing	28
	5.7 Tax Covenants	28
	5.8 Consents	31
	5.9 Access	32
ARTICLE VI                        CONDITIONS TO CLOSING		33
	6.1 Conditions to Each Party’s Obligation to Effect the Transactions	33
	6.2 Conditions to the Obligation of the Partnership Acquiring Entities	33
	6.3 Conditions to the Obligation of Antero	34
ARTICLE VII                   CLOSING		35
	7.1 Closing	35
	7.2 Deliveries by Antero	35
	7.3 Deliveries by the Partnership Acquiring Entities	35
ARTICLE VIII              INDEMNIFICATION		36
	8.1 Indemnification of Antero and Other Parties	36
	8.2 Indemnification of the Partnership and Other Parties	36
	8.3 Indemnification Procedures	37
	8.4 Calculation and Payment of Damages	38
	8.5 Waiver of Certain Damages	38
	8.6 Limitations on Indemnification	38
	8.7 Survival	39
	8.8 Mitigation	40
	8.9 Sole Remedy	40
	8.10 Consideration Adjustment	40
ARTICLE IX                        TERMINATION		40
	9.1 Events of Termination	40
	9.2 Effect of Termination	41
ARTICLE X                             MISCELLANEOUS		41
	10.1 Expenses	41
	10.2 Notices	41
	10.3 Governing Law and Venue	42
	10.4 Public Statements	42
	10.5 Form of Payment	42
	10.6 Entire Agreement; Amendments and Waivers	42
	10.7 Binding Effect and Assignment	43
	10.8 Severability	43
	10.9 Interpretation	43
	10.10 Headings and Schedules	44
	10.11 Counterparts	44
	10.12 Determinations by the Partnership	44

 

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EXHIBITS AND SCHEDULES

 

Exhibit A	Form of Assignment and Bill of Sale of Treatment Assets
Exhibit B	Form of Assignment of Water Interest
Exhibit C	Form of Water Services Agreement
Exhibit D	Form of Secondment Agreement
Exhibit E	Form of Amended and Restated Services Agreement
Schedule 1	Excluded Liabilities
Schedule 1A	NOVs
Schedule 1-1	Excluded Assets
Schedule 1-1A	Water Withdrawal Points and Withdrawal Agreements
Schedule 1-2	Treatment Assets and Liabilities
Schedule 1-3	Water Assets
Schedule 3.3	No Conflict
Schedule 3.4	Consents
Schedule 3.5	Laws and Regulations; Litigation
Schedule 3.6	Environmental Matters
Schedule 3.8(b)	Liens
Schedule 3.13	Taxes
Schedule 3.16	Adverse Changes
Schedule 4.3	No Conflict

 

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CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT

 

This Contribution, Conveyance and Assumption Agreement (this “ Agreement ”) is made and entered into as of September 17, 2015 by and among Antero Resources Corporation, a Delaware corporation (“ Antero ”), Antero Midstream Partners LP, a Delaware limited partnership (the “ Partnership ”), and Antero Treatment LLC, a Delaware limited liability company (“ Antero Treatment ” and, together with the Partnership, the “ Partnership Acquiring Entities ”). Antero, the Partnership and Antero Treatment are sometimes referred to in this Agreement individually as a “ Party ” and collectively as the “ Parties .”

 

RECITALS :

 

WHEREAS, Antero is the sole member of Antero Water LLC, a Delaware limited liability company (“ Antero Water ”);

 

WHEREAS, the Partnership is the sole member of Antero Treatment;

 

WHEREAS, pursuant to the Amended and Restated Contribution Agreement, dated November 10, 2014, by and between Antero and the Partnership (the “ Initial Contribution Agreement ”), the Partnership has the option to purchase, in its sole discretion, the Water Assets (as defined herein) at fair market value (the “ Water Option ”);

 

WHEREAS, on July 9, 2015, the Partnership notified Antero in writing of its intent to exercise the Water Option;

 

WHEREAS, in connection with the Partnership’s exercise of the Water Option, Antero intends to contribute (a) the Treatment Assets to Antero Treatment and (b) 100% of the outstanding limited liability company interests in Antero Water to the Partnership (the “ Water Interests ,” and together with the Treatment Assets, the “ Contributed Assets ”) in exchange for the consideration, and on the terms and conditions, set forth in this Agreement;

 

WHEREAS, the Conflicts Committee of the Board of Directors (the “ Conflicts Committee ”) of Antero Resources Midstream Management LLC, a Delaware limited liability company and the general partner of the Partnership (the “ General Partner ”) has (i) received an opinion of Evercore Group L.L.C., the financial advisor to the Conflicts Committee (the “ Partnership Financial Advisor ”), that the consideration to be paid by the Partnership as consideration for the Contributed Assets pursuant to this Agreement is fair to the Partnership from a financial point of view and (ii) found the transactions contemplated by the Transaction Documents to be not adverse to the Partnership and recommended that the Board of Directors of the General Partner approve the transactions contemplated by the Transaction Documents and, subsequently, the Board of Directors of the General Partner has approved the transactions contemplated by the Transaction Documents;

 

WHEREAS, the Special Committee of the Board of Directors of Antero (the “ Special Committee ”) has (i) received an opinion of Robert W. Baird & Co. Incorporated, the financial advisor to the Special Committee (the “ Antero Financial Advisor ”), that the aggregate consideration to be received by Antero as consideration for the Contributed Assets pursuant to

 

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this Agreement is fair, from a financial point of view, to Antero’s shareholders (other than Affiliates of Antero) and (ii) found the transactions contemplated by the Transaction Documents to be fair to and in the best interests of Antero and its shareholders (other than Affiliates of Antero) and recommended that the Board of Directors of Antero approve the transactions contemplated by the Transaction Documents and, subsequently, the Board of Directors of Antero has approved the transactions contemplated by the Transaction Documents; and

 

WHEREAS, on the Effective Date (as defined herein), on the terms and conditions set forth in this Agreement, each of the events and transactions set forth in Section 2.1 below shall be deemed to have occurred.

 

NOW, THEREFORE, in consideration of the mutual undertakings and agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

 

ARTICLE I
DEFINITIONS

 

Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms below:

 

“ AAA ” means the American Arbitration Association.

 

“ AAA Rules ” has the meaning set forth in Section 2.3(c)(i) .

 

“ Additional Cash Consideration ” has the meaning set forth in Section 2.2 .

 

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with, such specified Person through one or more intermediaries or otherwise; provided, however , that (a) with respect to Antero, the term “Affiliate” shall not include the General Partner or any member of the Partnership Group, (b) with respect to the Partnership Group, the term “Affiliate” shall exclude Antero and its other Subsidiaries and (c) with respect to each of the Parties, the term “Affiliate” shall exclude Antero Resources Investment LLC, a Delaware limited liability company.

 

“ Agreement ” has the meaning set forth in the preamble to this Agreement.

 

“ Antero ” has the meaning set forth in the preamble to this Agreement.

 

“ Antero Closing Certificate ” has the meaning set forth in Section 6.2(c) .

 

“ Antero Financial Advisor ” has the meaning set forth in the recitals to this Agreement.

 

“ Antero Indemnitees ” has the meaning set forth in Section 8.1 .

 

“ Antero Treatment ” has the meaning set forth in the preamble to this Agreement.

 

“ Antero Water ” has the meaning set forth in the recitals to this Agreement.

 

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“ Antero Water Net Working Capital ” means the Current Assets less the Current Liabilities.

 

“ Arbitrator ” has the meaning set forth in Section 2.3(c)(i) .

 

“ Asset Taxes ” means sales, use, ad valorem, property, excise or similar Taxes based upon the operation or ownership of the Water Assets but excluding, for the avoidance of doubt, (a) Income Taxes and (b) Transfer Taxes.

 

“ Assignment and Bill of Sale of Treatment Assets ” means that certain Assignment and Bill of Sale of Treatment Assets in the form attached as Exhibit A hereto.

 

“ Assignment of Water Interest ” means that certain Assignment of Water Interest in the form attached as Exhibit B hereto.

 

“ Barrel ” means forty-two U.S. gallons, each of which is equal to 231 cubic inches.

 

“ Business ” means, collectively, the operations and business (a) as historically conducted by Antero and its Affiliates using the Water Assets and (b) as contemplated to be conducted following the Closing Date by the Partnership Group using the Water Assets.

 

“ Cap ” has the meaning set forth in Section 8.6(a) .

 

“ Cash Consideration ” has the meaning set forth in Section 2.2 .

 

“ Claim Notice ” has the meaning set forth in Section 8.3(a) .

 

“ Closing ” has the meaning set forth in Section 7.1 .

 

“ Closing Date ” has the meaning set forth in Section 7.1 .

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Commission ” means the United States Securities and Exchange Commission.

 

“ Conflicts Committee ” has the meaning set forth in the recitals to this Agreement.

 

“ Consent ” has the meaning set forth in Section 3.4 .

 

“ Contract ” means any contract, commitment, instrument, undertaking, lease, sublease, note, mortgage, conditional sales contract, license, sublicense, franchise agreement, indenture, settlement, Permit or other legally binding agreement (whether oral or written).

 

“ Contributed Assets ” has the meaning set forth in the recitals to this Agreement.

 

“ Control ” means, where used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” have correlative meanings.

 

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“ Current Assets ” means the sum of Antero Water’s accounts receivable — affiliate plus its accounts receivable — third party.

 

“ Current Liabilities ” means the sum of Total Accounts Payable plus Total Accrued Expenses.

 

“ Customary Post-Closing Consents ” means (a) consents, approvals, licenses, permits, orders, waivers, authorizations, regulations, declarations and filings from or to (as applicable) Governmental Authorities that are customarily obtained or made (as applicable) after closing in connection with transactions contemplated by this Agreement and (b) any consents, approvals, waivers and authorizations of third parties (other than Governmental Authorities) that cannot be unreasonably withheld by the relevant Person.

 

“ Damages ” has the meaning set forth in Section 8.1 .

 

“ Debt Financed Distribution ” has the meaning set forth in Section 5.7(e)(ii) .

 

“ Deductible ” has the meaning set forth in Section 8.6(a) .

 

“ Delivered Volumes ” means MVC Credit Volumes plus, for any calendar year or calendar quarter, the aggregate number of additional Barrels of Fresh Water delivered to Persons other than Antero or any of its Affiliates  through the Water Assets to the extent such volumes are not included in the calculation of MVC Credit Volumes.

 

“ Earn-Out Report ” has the meaning set forth in Section 2.3(b) .

 

“ Earn-Out Report Dispute ” has the meaning set forth in Section 2.3(b) .

 

“ Earn-Out Payments ” has the meaning set forth in Section 2.3(a) .

 

“ Earn-Out Term ” means the First Earn-Out Term or the Second Earn-Out Term, as applicable.

 

“ Effective Date ” means October 1, 2015.

 

“ Environmental Laws ” means any and all applicable federal, state and local laws and regulations and other legally enforceable requirements and rules of common law, in each case, relating to the prevention of pollution or protection of human health or the environment or imposing liability or standards of conduct concerning handling or transportation of any Hazardous Materials.

 

“ Excluded Assets ” has the meaning provided such term in the Initial Contribution Agreement as well as the assets described on Schedule 1-1 .

 

“ Excluded Liabilities ” means (a) (i) any and all Income Taxes imposed on Antero or any of its Affiliates; (ii) the Asset Taxes allocable to Antero pursuant to Section 5.7(a) ; (iii) any Taxes imposed on or with respect to the Excluded Assets; and (iv) any and all other Taxes

 

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imposed on or with respect to the Water Assets for any taxable period (or portion thereof) ending on or prior to the Effective Date; and (b) the liabilities described on Schedule 1 .

 

“ Final Determination ” means (a) a decision, judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree or other order has become final, (b) a closing agreement made under Section 7121 of the Code (or a comparable agreement under the laws of a state, local or foreign taxing jurisdiction) with the relevant Tax Authority or other administrative settlement with or final administrative decision by the relevant Tax Authority, (c) a final disposition of a claim for refund, or (d) any agreement between Antero and the Partnership which they agree will have the same effect as an item in (a), (b), or (c) for purposes of this Agreement.

 

“ Financial Statements ” has the meaning set forth in Section 3.14(a) .

 

“ Financing ” has the meaning set forth in Section 2.2 .

 

“ First Earn-Out Term ” has the meaning set forth in Section 2.3(a) .

 

“ Fresh Water ” means either (i) raw fresh water or (ii) a mixture of raw fresh water and Treated Waste Water.

 

“ Fresh Water Distribution Business ” has the meaning set forth in Section 3.14(a) .

 

“ Fundamental Representations ” has the meaning set forth in Section 8.7 .

 

“ General Partner ” has the meaning set forth in the recitals to this Agreement.

 

“ Governmental Approval ” has the meaning set forth in Section 3.4 .

 

“ Governmental Authority ” means (a) the United States of America or any state or political subdivision thereof within the United States of America and (b) any court or any governmental or administrative department, commission, board, bureau or agency of the United States of America or of any state or political subdivision thereof within the United States of America.

 

“ Hazardous Material ” means (a) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (b) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (c) any petroleum or petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance regulated under or within the meaning of any applicable Environmental Law.

 

“ Hydrocarbons ” means oil and gas and other hydrocarbons produced in association therewith (whether in liquid or gaseous form), or any combination thereof, and any minerals produced in association therewith.

 

“ Income Taxes ” means any federal, state, local or foreign Taxes measured by or imposed on net income, gross revenue or receipts, including franchise or similar Taxes.

 

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“ Indemnity Claim ” has the meaning set forth in Section 8.3 .

 

“ Intellectual Property ” means (a) patents and patent applications; (b) trade secrets and confidential information, (c) copyrights, registered and unregistered; and (d) trademarks, service marks, trade names, trade dress, and domain names (“ Trademarks ”).

 

“ Initial Contribution Agreement ” has the meaning set forth in the preamble to this Agreement.

 

“ Investment Company Act ” has the meaning set forth in Section 3.18 .

 

“ Law ” means all laws (including common law), statutes, rules, regulations, ordinances, directives, orders or any similar provisions having the force or effect of Law of any applicable Governmental Authority.

 

“ Liability ” or “ Liabilities ” means any direct or indirect liability, indebtedness, Damage, deficiency, Tax, interest, penalty, amount paid in settlement, judgment, assessment, guaranty or endorsement of or by any Person, in the case of each of the foregoing, whether absolute or contingent, matured or unmatured, asserted or unasserted, accrued or unaccrued, due or to become due, liquidated or unliquidated.

 

“ Lien ” means any security interest, lien, deed of trust, mortgage, pledge, charge, claim, restriction, easement, encumbrance or other similar interest or right.

 

“ Litigation ” has the meaning set forth in Section 3.5 .

 

“ Material Adverse Effect ” means any change, circumstance, effect or condition that, individually or in the aggregate, (a) is, or could reasonably be expected to be, materially adverse to the business, financial condition, assets, liabilities or results of operations of the Business or (b) materially adversely affects, or could reasonably be expected to materially adversely affect, Antero’s ability to satisfy its obligations under the Transaction Documents, other than any changes (x) in the general state of the industries in which the Business operates or (y) in general economic conditions (including changes in commodity prices or interest rates), financial or securities markets or political conditions, provided , that in the case of clauses (x) and (y), the impact on the Business is not materially disproportionate to the impact on companies engaged in similar lines of business as the Business.

 

“ Material Contract ” means (a) any Contract (or series of related Contracts) relating to the ownership or operation of the Business or the ownership, use or operation of the Water Assets that, as of the date hereof, is reasonably expected to provide for revenues to or commitments of Antero or its Affiliates in an amount greater than $500,000 during any calendar year or (b) any other Contract (other than any Contract granting any Permits, servitudes, easements or rights-of-way) materially affecting the ownership or operation of the Business or the ownership, use or operation of the Water Assets, the loss of which could, individually or in the aggregate, have a Material Adverse Effect.

 

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“ MVC Credit Volumes ” shall have the meaning given to such term in the Water Services Agreement; provided, however, that the reference therein to “2019” shall be amended to state “2020” for purposes of this Agreement.

 

“ New Common Units ” has the meaning set forth in Section 2.2 .

 

“ Non-Hydrocarbon Systems ” has the meaning set forth in the definition of Water Assets.

 

“ Organizational Documents ” means, with respect to any Person, the articles of incorporation, certificate of incorporation, certificate of formation, certificate of limited partnership, bylaws, limited liability company agreement, operating agreement, partnership agreement, stockholders’ agreement, and all other similar documents, instruments or certificates executed, adopted or filed in connection with the creation, formation or organization of such Person, including any amendments thereto.

 

“ Partnership ” has the meaning set forth in the preamble to this Agreement.

 

“ Partnership Acquiring Entities ” has the meaning set forth in the preamble to this Agreement.

 

“ Partnership Closing Certificate ” has the meaning set forth in Section 6.3(c) .

 

“ Partnership Financial Advisor ” has the meaning set forth in the recitals to this Agreement.

 

“ Partnership Fundamental Representations ” has the meaning set forth in Section 8.7(b) .

 

“ Partnership Group ” means, collectively, the Partnership and its Subsidiaries.

 

“ Partnership Indemnitees ” has the meaning set forth in Section 8.2 .

 

“ Partnership Material Adverse Effect ” means any change, circumstance, effect or condition that (a) is, or could reasonably be expected to be, materially adverse to the business, financial condition, assets, liabilities or results of operations of the Partnership Group, taken as a whole or (b) materially adversely affects, or could reasonably be expected to materially adversely affect, the Partnership’s ability to satisfy its obligations under the Transaction Documents, other than any changes (x) in the general state of the industries in which the Partnership operates or (y) in general economic conditions (including changes in commodity prices or interest rates), financial or securities markets or political conditions, provided , that in the case of clauses (x) and (y), the impact on the Partnership is not materially disproportionate to the impact on companies engaged in similar lines of business as the Partnership.

 

“ Party ” or “ Parties ” has the meaning set forth in the preamble to this Agreement.

 

“ Permits ” means permits, licenses, certificates, orders, approvals, authorizations, grants, consents, concessions, warrants, franchises and similar rights and privileges.

 

“ Permitted Liens ” has the meaning set forth in Section 3.8(b) .

 

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“ Person ” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.

 

“ Required Consent ” has the meaning set forth in Section 5.8(c) .

 

“ Second Earn-Out Term ” has the meaning set forth in Section 2.3(a) .

 

“ Secondment Agreement ” means that certain Secondment Agreement in the form attached as Exhibit D hereto.

 

“ Securities Act ” has the meaning set forth in Section 3.12 .

 

“ Services Agreement ” means that certain Amended and Restated Services Agreement in the form attached as Exhibit E hereto.

 

“ Special Committee ” has the meaning set forth in the recitals to this Agreement.

 

“ Straddle Period ” means any Tax period beginning on or before and ending after the Effective Date.

 

“ Subsidiary ” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof; or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person; provided, however , that with respect to Antero, the term “Subsidiary” shall not include any member of the Partnership Group.

 

“ Tax ” or “ Taxes ” means any federal, state, local or foreign income tax, ad valorem tax, excise tax, sales tax, use tax, franchise tax, real or personal property tax, transfer tax, gross receipts tax or other tax, assessment, duty, fee, levy or other governmental charge, together with and including, any and all interest, fines, penalties, assessments, and additions to Tax resulting from, relating to, or incurred in connection with any of those or any contest or dispute thereof.

 

“ Tax Authority ” means any Governmental Authority having jurisdiction over the payment or reporting of any Tax.

 

“ Tax Proceeding ” has the meaning set forth in Section 5.7(d) .

 

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“ Tax Return ” means any report, statement, form, return or other document or information required to be supplied to a Tax Authority in connection with Taxes.

 

“ Total Accounts Payable ” means the sum of Antero Water’s accounts payable — capital plus its accounts payable — expense.

 

“ Total Accrued Expenses ” means the sum of Antero Water’s (a) accrued capital plus (b) accrued operating expenses plus (c) accrued expenses — interest plus (d) accrued expenses — ad valorem tax plus (e) accrued expenses — audit/tax plus (f) accrued expenses — other.

 

“ Total Cash Proceeds ” has the meaning set forth in Section 5.71(e)(i) .

 

“ Traceable Partnership Debt ” has the meaning set forth in Section 5.7(e)(i) .

 

“ Trademarks ” has the meaning set forth in the definition of Intellectual Property.

 

“ Transaction Documents ” means this Agreement, the Initial Contribution Agreement, the Water Services Agreement, the Secondment Agreement, the Services Agreement and each of the other documents and certificates to be delivered at Closing pursuant to Section 7.2 and Section 7.3 hereof.

 

“ Treated Waste Water ” means treated waste water, but excluding water remaining after treatment at the Treatment Facility.

 

“ Treatment Assets ” means the assets, contracts, rights, permits and properties owned or leased by Antero and used primarily in connection with the construction, ownership, operation, use or maintenance of Antero’s advanced wastewater treatment complex to be constructed in Doddridge County, West Virginia (the “ Treatment Facility ”), including those assets set forth on Schedule 1-2 hereto.

 

“ Treatment Facility ” has the meaning set forth in Article I of this Agreement under the definition of “ Treatment Assets .”

 

“ Transfer Taxes ” has the meaning set forth in Section 2.4 .

 

“ Unscheduled Consent ” has the meaning set forth in Section 5.8(b) .

 

“ Water Services Agreement ” means that certain Water Services Agreement in the form attached as Exhibit C hereto.

 

“ Water Assets ” means all assets in respect of the water business of Antero, including the following:

 

(a)                                  all assets and systems held by Antero or an Affiliate of Antero for the gathering or transportation of water, carbon dioxide or other non-Hydrocarbons, or the treatment, transportation, handling or disposal of waste water or other fluid waste, including the systems described on

 

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Schedule 1-3 (the foregoing, collectively, the “ Non-Hydrocarbon Systems ”);

 

(b)                                  all easements, surface use agreements, servitudes, third party permits, licenses, surface leases, sub-surface leases, rights-of-way, grazing rights, logging rights and other similar interests to the extent relating to surface operations or use or occupancy of the surface or the subsurface applicable to the Non-Hydrocarbon Systems, including the instruments and agreements described on Schedule 1-3 (the foregoing, collectively, the “ Water Easements ”), to the extent reasonably determined by Antero to be assignable;

 

(c)                                   all fee and leasehold interests in real property that relate primarily to the ownership or operation of the assets described in the other clauses of this definition, including the fee and leasehold interests described on Schedule 1-3 (the Water Easements and the interests described in this clause (c), collectively, the “ Water Lands ”, and the leases under which the leasehold interests described in this clause (c) are, collectively, the “ Water Leases ”);

 

(d)                                  all of the Water Personal Property, including the facilities and equipment described on Schedule 1-3 (the foregoing, collectively, the “ Water Equipment ”);

 

(e)                                   all Water Related Contracts, to the extent reasonably determined by Antero to be assignable;

 

(f)                                    all Permits issued to or held by Antero or any of its Affiliates in connection with Antero’s or its Affiliates’ ownership or operation of the other assets described in this definition, including those Permits described on Schedule 1-3 (the foregoing, collectively, the “ Water Permits ”), to the extent reasonably determined by Antero to be assignable;

 

(g)                                   all of Antero’s and its Affiliates rights, claims and causes of action (including warranty and similar claims that may be made against a third party vendor under a master service agreement or any other Water Related Contract) to the extent, and only to the extent, that such rights, claims or causes of action (i) are associated with the Water Assets and relate to the period of time from and after the acquisition of the Water Assets by the Partnership or (ii) relate to the liabilities to be assumed by the Partnership pursuant to any purchase of the Water Assets (excluding any such rights, claims and causes of action that arise from or are related to the ownership by Antero or its Affiliates of, or the rights of Antero or its Affiliates in respect of, the Excluded Assets) (the foregoing, collectively, the “ Water Claims ”), to the extent reasonably determined by Antero to be assignable;

 

(h)                                  all prepaid expenses (other than Taxes) attributable to the Water Assets that are paid by or on behalf of Antero or its Affiliates and are attributable

 

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to the periods of time on and after the acquisition of the Water Assets by the Partnership, including prepaid utility charges;

 

(i)                                      the Water Conveyed IP;

 

(j)                                     all of Antero’s and its Affiliates’ files, records and data directly and primarily relating to the items described in the preceding clauses above, including title records (including title opinions and curative documents), surveys, maps and drawings, operating data and records, maintenance records, and correspondence, including any Intellectual Property (other than Trademarks) held by Antero therein, except (i) to the extent the transfer, delivery or copying of such records may be restricted by contract with a third party or subject to a fee; (ii) all documents and instruments of Antero that may be protected by the attorney-client privilege; and (iii) all accounting and Tax files, books, records, Tax Returns and Tax work papers related to such items (the foregoing, collectively, the “ Water Records ”); and

 

(k)                                  the Treatment Assets.

 

Notwithstanding the foregoing, “Water Assets” shall not include any Excluded Assets, Excluded Liabilities or any Gathering and Compression Assets (as defined in the Initial Contribution Agreement).

 

“ Water Capital Expenditures ” has the meaning set forth in Section 5.7(f) .

 

“ Water Claims ” has the meaning set forth in the definition of Water Assets.

 

“ Water Conveyed IP ” means (a) all Intellectual Property (other than Trademarks) owned by Antero or its Affiliates primarily relating to the operation of the Non-Hydrocarbon Systems and (b) the Intellectual Property described in Schedule 1-3 , including all rights, claims and causes of action for past, present and future infringement and misappropriation of the Water Conveyed IP, including the right to seek injunctive relief and damages, and to collect and retain same.

 

“ Water Credit Facility ” means that certain Credit Agreement among Antero Water, Antero and certain Subsidiaries of Antero, as guarantors, certain lenders party thereto, JPMorgan Bank, N.A., as administrative agent, and the other parties thereto.

 

“ Water Easements ” has the meaning set forth in the definition of Water Assets.

 

“ Water Equipment ” has the meaning set forth in the definition of Water Assets.

 

“ Water Interests ” has the meaning set forth in the preamble to this Agreement.

 

“ Water Lands ” has the meaning set forth in the definition of Water Assets.

 

“ Water Leases ” has the meaning set forth in the definition of Water Assets.

 

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“ Water Option ” has the meaning set forth in the preamble to this Agreement.

 

“ Water Permits ” has the meaning set forth in the definition of Water Assets.

 

“ Water Personal Property ” means the equipment, structures, fixtures, improvements, equipment, storage tanks, pipelines, manifolds, casing, tubing, pumps, motors, machinery, flow lines and other items of every kind and nature primarily used or held for use in connection with the Water Assets.

 

“ Water Records ” has the meaning set forth in the definition of Water Assets.

 

“ Water Related Contracts ” means those transportation agreements, operating agreements, balancing agreements, facilities or equipment leases, interconnection agreements, service and parts agreements and all other contracts to which Antero or an Affiliate of Antero is a party, that relate primarily to the ownership or operation of the Water Assets and that will be binding on the Partnership or any of the Water Assets after the acquisition by the Partnership, including the contracts set forth on Schedule 1-3 , but excluding any contract that is an Excluded Asset.

 

ARTICLE II
CONTRIBUTIONS, CONVEYANCES, ACKNOWLEDGMENTS AND DISTRIBUTIONS

 

2.1                                Contributions .

 

(a)          Prior to the Closing, Antero shall use reasonable best efforts, subject to its obligations in Section 5.8 , to cause the contribution, assignment, transfer and conveyance of all Water Assets (other than the Treatment Assets) and related liabilities and obligations to Antero Water to the extent such Water Assets and related liabilities and obligations are not currently held by Antero Water.  At the Closing and deemed effective as of the Effective Date, on the terms and subject to the conditions of this Agreement, Antero shall (i) contribute, assign, transfer and convey to the Partnership the Water Interests and (ii) subject to its obligations in Section 5.8 , contribute, assign, transfer and convey to Antero Treatment the Treatment Assets and related liabilities and obligations, in exchange for the consideration set forth in Section 2.2 , and (x) the Partnership shall accept the contribution of the Water Interests and (y) Antero Treatment shall accept the contribution of the Treatment Assets and shall assume the related liabilities and obligations. Antero acknowledges and agrees that the Excluded Liabilities will be retained by Antero and not assumed by the Partnership or Antero Treatment.

 

(b)          Net Working Capital . Antero shall cause the Antero Water Net Working Capital to be $0 as of the Effective Date.

 

2.2                                                        Consideration .  At the Closing, in consideration for the contribution of the Contributed Assets, the Partnership shall: (a) pay to Antero a cash distribution equal to $552,450,000, less any indebtedness (including principal and accrued interest) outstanding as of the Closing under the Water Credit Facility and assumed by the Partnership in connection with the Closing (the “ Cash Consideration ”) and (b) issue 23,886,421 common units representing limited partner interests in the Partnership (the “ New Common Units ”) to Antero. In connection with the execution of this Agreement, the Partnership entered into definitive documentation to issue and sell common units representing limited partner interests in the Partnership in a private

 

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placement (the “ Financing ”). The Financing is expected to be consummated simultaneously with the Closing. The Partnership agrees to pay to Antero an amount equal to the net proceeds received from the Financing (the “ Additional Cash Consideration ”) as an increase to the Cash Consideration in exchange for a reduction in the number of New Common Units issuable to Antero at the Closing equal to the number of common units issued and sold in the Financing; provided , however , that notwithstanding the foregoing, the number of New Common Units issuable to Antero at the Closing pursuant to this Section 2.2 shall not be less than 4,777,284 New Common Units and the number of New Common Units issuable pursuant to the Financing shall not exceed 19,109,137.  The Earn-Out Payments, if any, shall be paid by the Partnership in accordance with Section 2.3 and shall be deemed to be additional consideration for the Contributed Assets only if and when paid to Antero in accordance with this Agreement.  The Cash Consideration (for the avoidance of doubt, including any Additional Cash Consideration) and the Earn-Out Payments, if any, shall be sourced by the Partnership from the proceeds of the Traceable Partnership Debt to the extent provided in Section 5.7(e) . Notwithstanding Section 5.4 or anything else to the contrary in this Agreement, Antero agrees to retain and to pay all obligations for (i) capital expenditures incurred by Antero or its Affiliates and associated with the design and construction of the Treatment Facility that were accrued prior to July 31, 2015 and (ii) capital expenditures incurred by Antero or its Affiliates or the Partnership and its Affiliates, in each case associated with the design and construction of the Treatment Facility that were accrued after July 31, 2015 up to a maximum amount pursuant to this clause (ii) of $12,000,000 (and Antero shall reimburse the Partnership for any capital expenditures paid by the Partnership that are within the scope of this clause (ii)).  The Partnership shall reimburse Antero for any capital expenditures funded prior to the Closing by Antero or its Affiliates associated with the design, construction, ownership, operation, use or maintenance of the Treatment Facility in excess of the $12,000,000 limit referenced in clause (ii) of the immediately preceding sentence by increasing the Cash Consideration paid at Closing by such amount.  Antero shall provide the Partnership with a written description and amount of such capital expenditures no less than three days prior to the Closing.

 

2.3                                Earn-Out Payments .

 

(a)                                  Following the Closing and as additional consideration for the contribution by Antero to the Partnership and Antero Treatment of the Contributed Assets, Antero shall be entitled to receive from the Partnership (subject to the terms and conditions of this Section 2.3 ) cash determined in accordance with this Section 2.3 (the “ Earn-Out Payments ”).  In addition to the consideration set forth in Section 2.2 above, Antero shall be entitled to a cash payment equal to (i) $125,000,000 if the aggregate Delivered Volumes during the period beginning on January 1, 2017 and ending on December 31, 2019 (the “ First Earn-Out Term ”), is greater than or equal to 176,295,000 barrels and (ii) an additional $125,000,000 if the Delivered Volumes during the period beginning on January 1, 2018 and ending on December 31, 2020 (the “ Second Earn-Out Term ”), is greater than or equal to 219,200,000 barrels.

 

(b)                                  Within 30 days after the end of the applicable Earn-Out Term, Antero shall in good faith prepare and deliver to the Partnership a report setting forth Antero’s calculation of the Delivered Volumes during such Earn-Out Term as well as any other information that the Partnership may reasonably request in order to verify such Delivered Volumes (each such report, an “ Earn-Out Report ”).  The Earn-Out Report and the Delivered

 

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Volumes for the Earn-Out Term reflected thereon shall be final and binding upon Antero and the Partnership upon the approval of such Earn-Out Report by the Partnership, in a written notice that specifically states such approval and references this Section 2.3(b) , or the failure of the Partnership to object in a written notice to Antero that specifically references this Section 2.3(b)  within 15 days after receipt of the Earn-Out Report by the Partnership.  If the Partnership does not agree with the Earn-Out Report and the calculation of the Delivered Volumes stated thereon, and Antero and the Partnership cannot mutually agree on the calculation of Delivered Volumes for such Earn-Out Term, then within 45 days following receipt by the Partnership of the Earn-Out Report, Antero and the Partnership shall resolve such dispute (the “ Earn-Out Report Dispute ”) in accordance with Section 2.3(c) .  If at any time the Partnership and Antero resolve the Earn-Out Report Dispute, then notwithstanding the preceding provisions of this Section 2.3(b)  and Section 2.3(c) , the dispute resolution procedures in Section 2.3(c)  promptly shall be discontinued with respect to such agreed matters and the Earn-Out Report and the Delivered Volumes shall be revised, if necessary to reflect such resolution and thereupon shall become binding upon Antero and the Partnership for purposes hereof.  Each Earn-Out Payment, if any, that the Partnership becomes obligated to pay to Antero (by wire transfer of immediately available funds to an account or accounts specified by Antero) pursuant to this Section 2.3 shall be paid to Antero within five Business Days of the determination of the Earn-Out Payment becoming final and binding upon the Parties in accordance with Section 2.3(b).

 

(c)                                   If Antero and the Partnership are unable to resolve an Earn-Out Report Dispute as contemplated by Section 2.3(b) , then such Earn-Out Report Dispute shall be submitted to mandatory and binding arbitration pursuant to the following conditions:

 

(i)                                      Procedures . The arbitration shall be conducted pursuant to the Federal Arbitration Act and the Commercial Arbitration Rules of the AAA, as they may be amended from time to time, except as expressly provided in this Section 2.3(c)  (the “ AAA Rules ”) with the arbitrators selected pursuant to the procedures set forth in this Section 2.3(c)  (each, an “ Arbitrator ”).  In resolving the substance of the Earn-Out Report Dispute, the Arbitrators shall apply substantive Colorado Law; provided, however, that no aspect of the Colorado Dispute Resolution Act shall be applied to the arbitration proceeding.

 

(ii)                                   Selection of Arbitrators . The Earn-Out Report Dispute will be resolved by a panel of three Arbitrators, unless Antero and the Partnership mutually agree upon the selection of a single Arbitrator.  Within 15 days after a failure to resolve any dispute regarding the calculation of the Delivered Volumes in an Earn-Out Report in accordance with Section 2.3(b) , each of Antero and the Partnership shall appoint one person to serve as an Arbitrator and, within 10 days after the later to occur of such appointments, the two appointed Arbitrators shall mutually agree to appoint a third Arbitrator, failing agreement on which such third Arbitrator shall be appointed by AAA in accordance with its rules.  If either Antero or the Partnership does not appoint an Arbitrator within 15 days after such failure to resolve any dispute regarding the calculation of the Delivered Volumes in an Earn-Out Report in accordance with Section 2.3(b) , then the other party may submit an appropriate request to the AAA to initiate proceedings and AAA shall select such Arbitrator in accordance with its rules. Should any Arbitrator refuse or

 

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be unable to proceed with arbitration proceedings as called for in this Section 2.3(c) , such Arbitrator shall be replaced by AAA in accordance with Section 2.3(c)(viii)  below.

 

(iii)                                Place of Arbitration .  The arbitration shall be held in Denver, Colorado.

 

(iv)                               Conduct of Arbitration . The Arbitrators shall allow reasonable discovery in the forms permitted by the AAA Rules, to the extent consistent with the purposes of the arbitration.  Recognizing the express desire of the parties for an expeditious means of dispute resolution, the Arbitrators shall limit or allow the parties to expand the scope of discovery as may be reasonable and necessary under the circumstances.  The arbitration hearing shall be commenced promptly and conducted expeditiously.  If one party seeks discovery of electronic communications, such as emails, from another party, the Arbitrators shall have the authority to impose reasonable limits on the timing and extent of such discovery, and allow the producing party to recover reasonable expenses and costs associated with that discovery.  Unless otherwise agreed by the parties, the arbitration hearing shall be conducted on consecutive days.  The Arbitrators must give effect to legal privileges including the attorney-client privilege and work-product immunity.  The Arbitrators shall act by majority vote in resolving all Earn-Out Report Disputes.

 

(v)                                  Arbitration Award .  The Arbitrators shall endeavor to render a binding, written decision within 14 days following the completion of the arbitration hearing.

 

(vi)                               Binding Nature of the Arbitration Award . The arbitration award shall be binding on the parties, and judgment thereon may be entered in any court of competent jurisdiction, and may not be appealed except to the extent permitted by the Federal Arbitration Act.

 

(vii)                            Time of the Essence . The Arbitrators are to be instructed that time is of the essence in the arbitration proceeding.

 

(viii)                         Replacement of Arbitrator .  Should any Arbitrator refuse or be unable to proceed with arbitration proceedings as called for by this Section 2.3(c) , such Arbitrator shall be replaced in the same manner by which he or she was appointed (e.g., if a party appointed the departing Arbitrator, that party would appoint the departing Arbitrator’s replacement, and if the two Party-appointed Arbitrators appointed the departing Arbitrator, then such party-appointed Arbitrators would appoint the departing Arbitrator’s replacement).

 

(ix)                               Confidentiality .  To the fullest extent permitted by the Laws of the State of Colorado, the arbitration proceedings and award shall be maintained in confidence by the parties.

 

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(x)                                  Expenses . The Arbitrators shall have the authority to award attorneys’ fees and expenses to the prevailing party.

 

(xi)                               THE PARTIES EXPRESSLY ACKNOWLEDGE AND AGREE THAT IN ENTERING INTO THIS SECTION 2.3(C) , THEY ARE KNOWINGLY AND VOLUNTARILY WAIVING THEIR RIGHTS TO A JURY TRIAL.

 

2.4                                Transfer Taxes .  To the extent that any sales, use, transfer, purchase, filing, recordation, stamp, registration and similar Taxes are payable as a result of the transactions contemplated by this Agreement (collectively, “ Transfer Taxes ”), such Transfer Taxes shall be borne fifty percent (50%) by Antero and fifty percent (50%) by the Partnership.  To the extent under applicable Law the transferee is responsible for filing Tax Returns or other documentation in respect of Transfer Taxes, the Partnership shall prepare and file all such Tax Returns or other documentation.  The Parties shall provide such certificates and other information and otherwise cooperate in good faith to minimize, to the extent permitted under applicable Law, any Transfer Taxes.  The Party that is not responsible under applicable Law for paying the Transfer Taxes shall pay its share of the Transfer Taxes to the responsible Party prior to the due date of such Transfer Taxes.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ANTERO

 

Antero hereby represents and warrants to the Partnership Acquiring Entities that, as of the date hereof:

 

3.1                                Organization and Existence .

 

(a)                                  Antero has been duly organized and is validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate the properties and assets it now owns, leases and operates and to carry on its business as and where such properties and assets are now owned or held and such business is now conducted.  Antero is duly qualified to transact business and is in good standing as a foreign entity in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing does not have a Material Adverse Effect.

 

(b)                                  Antero Water has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its formation, with full limited liability company power and authority to own, lease, use and operate the properties and assets it now owns, leases, uses and operates and to carry on its business as and where such properties and assets are now owned or held and such business is now conducted.  Antero Water is duly qualified to transact business and is in good standing as a foreign entity in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing does not have a Material Adverse Effect.  Antero has delivered to the Partnership correct and complete copies of Antero Water’s Organizational Documents, as

 

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amended to date.  There is no pending, or to the knowledge of Antero, threatened, action for the dissolution, liquidation or insolvency of Antero Water.

 

3.2                                Authority and Approval; Enforceability .  Antero has the corporate power and authority to execute and deliver this Agreement and each of Antero and its Subsidiaries has the corporate or limited liability company power and authority to execute and deliver any other Transaction Document to which it is or will be a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it.  The execution and delivery by Antero of this Agreement and the execution and delivery by each of Antero and its Subsidiaries of any other Transaction Document to which it is or will be a party, the performance by Antero or its applicable Subsidiary of all the terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite corporate or limited liability company action of Antero and any applicable Subsidiary of Antero.  Each of this Agreement and any other Transaction Document to which Antero or any Subsidiary of Antero is or will be a party constitutes or will constitute, upon execution and delivery by Antero or such applicable Subsidiary of Antero, the valid and binding obligation of Antero or such Subsidiary of Antero, enforceable against Antero or such Subsidiary of Antero in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

 

3.3                                No Conflict .  Other than as set forth on Schedule 3.3 or Schedule 3.4 , this Agreement, the other Transaction Documents to which Antero or any Subsidiary of Antero is or will be a party, the execution and delivery hereof and thereof by Antero or any Subsidiary of Antero do not and will not, and the fulfillment and compliance with the terms and conditions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not:

 

(a)                                  conflict with any of the provisions of the Organizational Documents of Antero or any of its Subsidiaries;

 

(b)                                  conflict with any provision of any law or administrative regulation or any judicial, administrative or arbitration order, award, judgment, writ, injunction or decree applicable to Antero or any of its Subsidiaries;

 

(c)                                   conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both) or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or give others the right to terminate, in each case, any indenture, mortgage, Lien or Contract to which Antero or any of its Subsidiaries is a party or by which any of them is bound or to which any of the Water Interests or any of the Water Assets are subject or that could prevent or materially delay the consummation of the transactions contemplated by the Transaction Documents;

 

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(d)                                  result in the creation of, or afford any Person the right to obtain, any material Lien on the capital stock or other equity interests, property or assets of Antero or any of its Subsidiaries; or

 

(e)                                   result in the revocation, cancellation, suspension or material modification, individually or in the aggregate, of any Governmental Approval possessed by Antero or any of its Subsidiaries that is necessary or desirable for the ownership, lease or operation of the Water Assets or the Business as conducted as of the date of this Agreement, including any Governmental Approvals under any applicable Environmental Law;

 

except, in the case of clauses (b) , (c) , (d)  and (e) , as would not have, individually or in the aggregate, a Material Adverse Effect and except, in each case, for such matters as will have been cured at or prior to the Closing.

 

3.4                                Consents .  Except as set forth in Schedule 3.4 , and except for notice to, or consent of, Governmental Authorities related to the transfer of environmental Permits, no consent, approval, license, permit, order, waiver, or authorization of, or registration, declaration, or filing with any Governmental Authority (each a “ Governmental Approval ”) or other Person is required to be obtained or made by or with respect to Antero or any of its Subsidiaries in connection with:

 

(a)                                  the execution, delivery, and performance of this Agreement or the other Transaction Documents, or the consummation of the transactions contemplated hereby and thereby; or

 

(b)                                  the enforcement against Antero or any of its Subsidiaries of its obligations under this Agreement or the other Transaction Documents;

 

except, in each case, as would not have, individually or in the aggregate, a Material Adverse Effect (each of the foregoing, a “ Consent ”).

 

3.5                                Laws and Regulations; Litigation .  Except as set forth in Schedule 3.5 , there are no pending or, to Antero’s knowledge, threatened claims, fines, actions, suits, demands, investigations or proceedings or any arbitration or binding dispute resolution proceeding (collectively, “ Litigation ”) against Antero Water, or against or affecting the Business or the Water Assets or the ownership and operation of the Business or the Water Assets (other than Litigation under any Environmental Law, which is the subject of Section 3.6 ) that (i) would individually, or in the aggregate, have a Material Adverse Effect or (ii) seek any material injunctive relief with respect to the Business or the Water Assets.  Except as would not, individually or in the aggregate, have a Material Adverse Effect, Antero Water is not in violation of or in default under any law or regulation or under any order (other than Environmental Laws, which are the subject of Section 3.6 ) of any Governmental Authority applicable to it.  Except as would not, individually or in the aggregate, have a Material Adverse Effect, no Litigation is pending or, to Antero’s knowledge, threatened to which Antero or any of its Subsidiaries is or may become a party that questions or involves the validity or enforceability of any of its respective obligations under this Agreement or seeks to prevent or delay, or seeks substantial damages in connection with, the consummation of the transactions contemplated hereby.

 

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3.6                                Environmental Matters .  Except as set forth in Schedule 3.6 , with respect to the Business or Antero Water, except as would not, individually or in the aggregate, have a Material Adverse Effect, Antero and its Subsidiaries (i) are in compliance with Environmental Laws, (ii) are not the subject of any outstanding administrative or judicial order of judgment, agreement or arbitration award from any Governmental Authority under any Environmental Law relating to the Water Assets or Antero Water and requiring remediation or the payment of a fine or penalty, (iii) have received all Permits required of them under applicable Environmental Laws necessary to conduct the Business as presently conducted or in light of the current stage of development or construction of the Water Assets, (iv) are in compliance with all terms and conditions of any such Permits, (v) are not subject to any pending Litigation involving any Environmental Law with respect to which Antero or any of its Subsidiaries has been contacted in writing, and (vi) do not have any liability in connection with the release into the environment of any Hazardous Material.

 

3.7                                Water Interests .

 

(a)                                  The Water Interests (i) constitute 100% of the limited liability company interests in Antero Water and (ii) were duly authorized and validly issued and are fully paid and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware Limited Liability Company Act). The Water Interests are not subject to and were not issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of local or state law applicable to such interests, Antero Water’s Organizational Documents, or any Contract to which Antero or any of its Subsidiaries is a party or to which it or any of its properties or assets is otherwise bound.

 

(b)                                  As of immediately prior to the Closing, Antero has good and valid record and beneficial title to the Water Interests, free and clear of any and all Liens, and, except as provided or created by the Organizational Documents of Antero Water, the Securities Act or applicable securities laws, the Water Interests are free and clear of any restrictions on transfer or claims.  There are no options, warrants, purchase rights, Contract rights or other securities exercisable or exchangeable for any equity interests of Antero Water, any other commitments or Contracts providing for the issuance of additional equity interests of Antero Water, or for the repurchase or redemption of the Water Interests, or any Contracts of any kind which may obligate Antero Water to issue, purchase, register for sale, redeem or otherwise acquire any of its equity interests.  Immediately after the Closing, the Partnership will have good and valid record and beneficial title to such Water Interests, free and clear of any Liens (other than Permitted Liens) that have been created by, through or under Antero.

 

3.8                                Water Assets .

 

(a)                                  At the Closing, the Water Assets, when considered together with the services provided by Antero and its Affiliates pursuant to the Services Agreement and the Secondment Agreement, will be sufficient to conduct the Business in a manner consistent in all material respects with the way the Business is conducted as of the date of this Agreement.

 

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(b)                                  Except as set forth in Schedule 3.8(b) , Antero and Antero Water, as applicable, have valid and indefeasible title in fee to all real property and interests in real property constituting part of the Water Assets and purported to be owned in fee, and good and valid title to the leasehold estates in all other real property and interests in real property (including rights of way) constituting part of the Water Assets, in each case except as would not have a Material Adverse Effect. Antero and Antero Water, as applicable, own all such real property and interests in real property free and clear of any Liens except (i) those set forth in Schedule 3.8(b) , (ii) mechanics’, carriers’, workmen’s, repairmen’s or other similar Liens arising or incurred in the ordinary course of business that are not yet delinquent or can be paid without penalty or are being contested in good faith and by appropriate proceedings in respect thereof and for which an appropriate reserve has been established in accordance with U.S. generally accepted accounting principles, (iii) Liens for current period Taxes that are not yet due and payable or are being contested in good faith and by appropriate proceedings in respect thereof and for which an appropriate reserve has been established in accordance with U.S. generally accepted accounting principles, (iv) Liens securing debt of Antero or any of its Subsidiaries that will be released prior to or as of the Closing and (v) other imperfections of title or encumbrances that, individually or in the aggregate, could not reasonably be expected to materially interfere with the ordinary conduct of the Business (the Liens described in clauses (i), (ii), (iii), (iv) and (v) above, being referred to collectively as “ Permitted Liens ”).

 

(c)                                   All tangible personal property included in the Water Assets is owned by Antero or Antero Water, as applicable, free and clear of all Liens except Permitted Liens. All tangible personal property included in the Water Assets is, in the aggregate, in good operating condition and repair (normal wear and tear excepted) and has been maintained in accordance with applicable laws and regulations, as well as generally accepted industry practice, and is sufficient for the purposes for which it is currently being used or held for use.

 

(d)          Schedule 1-2 sets forth, in all material respects, all rights, Contracts, Permits and related instruments associated with the Treatment Assets and all Liabilities associated therewith.

 

3.9                                Permits .  Antero or Antero Water, as applicable, holds or has a valid right to use all Permits (other than environmental Permits, which are the subject of Section 3.6 ) that are necessary for the conduct of the Business and the ownership and operation of the Water Assets in a manner consistent in all material respects with the way the Business is conducted as of the date of this Agreement, each in compliance with applicable laws and regulations of applicable Governmental Authorities, except for those Permits the failure of which to have would not, individually or in the aggregate, have a Material Adverse Effect.  Antero or its Affiliates have complied in all material respects with all terms and conditions of such Permits.

 

3.10                         Insurance .  Antero or its Affiliates maintain policies of fire and casualty, liability and other forms of property and liability insurance related to the Water Assets and the Business in such amounts, with such deductibles, and against such risks and losses as are, in their judgment, reasonable for the Business and the Water Assets.  All such policies are in full force and effect, all premiums due and payable thereon have been paid, and no notice of cancellation or termination has been received with respect to any such policy that has not been replaced on substantially similar terms prior to the date of such cancellation.

 

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3.11                         Brokerage Arrangements .  Neither Antero nor any of its Affiliates has entered, directly or indirectly, into any Contract with any Person that would obligate the General Partner or any member of the Partnership Group to pay any commission, brokerage or “finder’s fee” or other fee in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby.

 

3.12                         Investment .  Antero is an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act, as amended (the “ Securities Act ”). Antero is not acquiring the New Common Units with a view to or for sale in connection with any distribution thereof or any other security related thereto within the meaning of the Securities Act.  Antero is familiar with investments of the nature of the New Common Units, understands that this investment involves substantial risks, has adequately investigated the Partnership and the New Common Units, and has substantial knowledge and experience in financial and business matters such that it is capable of evaluating, and has evaluated, the merits and risks inherent in purchasing the New Common Units, and is able to bear the economic risks of such investment. Antero has had the opportunity to visit with the Partnership and meet with the officers of the General Partner and other representatives to discuss the business, assets, liabilities, financial condition, and operations of the Partnership, has received all materials, documents and other information that Antero deems necessary or advisable to evaluate the Partnership and the New Common Units, and has made its own independent examination, investigation, analysis and evaluation of the Partnership and the New Common Units, including its own estimate of the value of the New Common Units.  Antero has undertaken such due diligence (including a review of the properties, liabilities, books, records and contracts of the Partnership) as Antero deems adequate. Antero acknowledges that the New Common Units have not been registered under applicable federal and state securities laws and that the New Common Units may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is registered under applicable federal and state securities laws or pursuant to an exemption from registration under any federal or state securities laws.

 

3.13                         Taxes .  Except as set forth on Schedule 3.13 or as would not, individually or in the aggregate, have a Material Adverse Effect:

 

(a)                                  all Tax Returns that are required to be filed by or with respect to Antero Water or the Water Assets on or prior to the Closing Date (taking into account any valid extension of time within which to file) have been or will be timely filed on or prior to the Closing Date and all such Tax Returns are or will be true, correct and complete in all material respects;

 

(b)                                  all Taxes due and payable by or with respect to Antero Water or the Water Assets (whether or not shown on any Tax Return) have been fully paid and all deficiencies asserted or assessments made with respect to such Tax Returns have been paid in full or properly accrued for by Antero;

 

(c)                                   no examination, audit, claim, assessment, levy, or administrative or judicial proceeding regarding any of the Tax Returns described in Section 3.13(a)  or any Taxes

 

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of or with respect to Antero Water or the Water Assets are currently pending or have been proposed in writing or have been threatened in writing;

 

(d)                                  no waivers or extensions of statutes of limitations have been given or requested in writing with respect to any amount of Taxes of or with respect to Antero Water or the Water Assets or any Tax Returns of or with respect to Antero Water or the Water Assets;

 

(e)                                   there are no Liens (other than Permitted Liens) on the Water Interests or the Water Assets that arose in connection with any failure (or alleged failure) to pay any Tax;

 

(f)                                    Antero Water is not a party to or bound by any Tax allocation or sharing agreements;

 

(g)                                   the Water Assets can be operated and the Business (as set forth in clause (b) of the definition thereof) can be conducted in accordance with the factual information presented in the supplemental private letter ruling request the Partnership submitted to the Internal Revenue Service on April 3, 2015 and the private letter ruling that the Internal Revenue Service issued to the Partnership on May 26, 2015. Antero expects that at least 90% of the combined gross income of the Partnership, Antero Water, Antero Treatment and the operations conducted with the Water Assets in 2015 after the Closing Date will be “qualifying income” within the meaning of Section 7704(d) of the Code; and

 

(h)                                  Antero Water will, at Closing, be classified as an entity disregarded as separate from its owner for U.S. federal income Tax purposes in accordance with Treasury Regulation Section 301.7701-3.

 

3.14                         Financial Statements .

 

(a)                                  Antero has delivered to the Partnership balance sheets as of June 30, 2015 and December 31, 2014 and 2013 and statements of operations and comprehensive income, statements of equity and statements of cash flows for the six months ended June 30, 2015 and the years ended December 31, 2014 and 2013, in each case with respect to the fresh water distribution business (the “ Fresh Water Distribution Business ”) that, to the Parties’ knowledge, comprises the only “business” (as defined under Regulation S-X 11-01(d)) within the Business and the Water Assets (the “ Financial Statements ”).

 

(b)                                  The Financial Statements have been prepared from the books and records of Antero and its Subsidiaries in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby (except that the financial statements as of and for the six months ended June 30, 2015 do not include normal recurring year-end adjustments and footnotes required by U.S. generally accepted accounting principles for complete financial statements) and, to the knowledge of Antero, present fairly in all material respects the consolidated financial position, results of operations and cash flows of or attributable to the Fresh Water Distribution Business as of and for the periods stated in such Financial Statements.

 

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(c)                                   There are no liabilities or obligations related to the Fresh Water Distribution Business (whether accrued, absolute, contingent or otherwise) and there are no facts or circumstances that would result in any such liabilities or obligations, other than (i) liabilities or obligations reflected or reserved against in the Financial Statements, (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practices since June 30, 2015, (iii) liabilities or obligations arising under executory Contracts entered into in the ordinary course of business consistent with past practices, (iv) liabilities not required to be presented by U. S. general accepted accounting principles in unaudited financial statements, (v) liabilities or obligations under this Agreement and (vi) other liabilities or obligations which, in the aggregate, would not have a Material Adverse Effect.

 

3.15                         Material Contracts .  Antero has made available to the Partnership a correct and complete copy of each Material Contract (including any amendments thereto).  Each Material Contract is in full force and effect, and none of Antero, Antero Water, or, to the knowledge of Antero, any other party, is in breach or default thereunder and no event has occurred that upon receipt of notice or lapse of time or both would constitute any breach or default thereunder, except, in each case, for such breaches or defaults as would not, individually or in the aggregate, have a Material Adverse Effect. None of Antero or Antero Water has given or received from any third party any notice of any action or intent to terminate or amend in any material respect any Material Contract.

 

3.16                         No Adverse Changes .  Except as set forth in Schedule 3.16 or as described in the Financial Statements, from June 30, 2015:

 

(a)                                  there has not been a Material Adverse Effect; and

 

(b)                                  the Business and the Water Assets have been operated and maintained in the ordinary course of business consistent with past practices or as otherwise required pursuant to the terms of this Agreement.

 

3.17                         Employees .  Antero Water has no employees.

 

3.18                         Investment Company Act .  Antero Water is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder (collectively, the “ Investment Company Act ”) or a “business development company” (as defined in Section 2(a)(48) of the Investment Company Act).

 

3.19                         No Other Representations or Warranties; Schedules .  Except as set forth in this Article III and the Assignment and Bill of Sale of Treatment Assets, and except for any special warranty of title provided in any assignment or conveyance of the Water Assets from Antero (or any of its Affiliates) to Antero Water prior to the date hereof, neither Antero nor Antero Water makes any other express or implied representation or warranty with respect to the Contributed Assets, the Water Assets or the transactions contemplated by this Agreement, and disclaims any other representations or warranties. The disclosure of any matter or item in any schedule to this Agreement shall not be deemed to constitute an acknowledgment that any such matter is required to be disclosed.

 

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP ACQUIRING ENTITIES

 

The Partnership Acquiring Entities hereby represent and warrant to Antero that, as of the date hereof:

 

4.1                                Organization and Existence .  Each of the Partnership Acquiring Entities is an entity duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all limited partnership or limited liability company power and authority, as applicable, to own the Water Interests and the Water Assets.  Each of the Partnership Acquiring Entities is duly qualified to transact business as a limited partnership or limited liability company, as applicable, and is in good standing as a foreign entity in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing does not have a Partnership Material Adverse Effect. Antero Treatment will, at Closing, be classified as an entity disregarded as separate from the Partnership for U.S. federal income Tax purposes in accordance with Treasury Regulation Section 301.7701-3.

 

4.2                                Authority and Approval; Enforceability .  Each of the Partnership Acquiring Entities has the requisite power and authority to execute and deliver this Agreement and any other Transaction Document to which it is or will be a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it.  The execution and delivery by each of the Partnership Acquiring Entities of this Agreement and any other Transaction Document to which it is or will be a party, the performance by it of all the terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite action of the Partnership Acquiring Entities.  Each of this Agreement and any other Transaction Document to which each of the Partnership Acquiring Entities is or will be a party constitutes or will constitute, upon execution and delivery by each of the Partnership Acquiring Entities, as applicable, the valid and binding obligation of each of the Partnership Acquiring Entities, as applicable, enforceable against each of the Partnership Acquiring Entities in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

 

4.3                                No Conflict .  Other than as set forth on Schedule 4.3 , this Agreement, the other Transaction Documents to which the Partnership Acquiring Entities or any other member of the Partnership Group is or will be a party and the execution and delivery hereof and thereof by the Partnership Acquiring Entities or any other member of the Partnership Group do not and will not, and the fulfillment and compliance with the terms and conditions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not:

 

(a)                                  conflict with any of the provisions of the Organizational Documents of the Partnership Acquiring Entities or any other member of the Partnership Group;

 

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(b)                                  conflict with any provision of any law or administrative regulation or any judicial, administrative or arbitration order, award, judgment, writ, injunction or decree applicable to the Partnership, the General Partner or any other member of the Partnership Group;

 

(c)                                   conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both) or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or give others the right to terminate, in each case, any indenture, mortgage, Lien or Contract to which the Partnership Acquiring Entities or any other member of the Partnership Group is a party or by which any of them is bound;

 

(d)                                  result in the creation of, or afford any Person the right to obtain, any material Lien on the capital stock or other equity interests, property or assets of the Partnership Acquiring Entities or any other member of the Partnership Group; or

 

(e)                                   result in the revocation, cancellation, suspension or material modification, individually or in the aggregate, of any Governmental Approval (as defined below) possessed by the Partnership Acquiring Entities or any other member of the Partnership Group that is necessary or desirable for the ownership, lease or operation of its properties and other assets in the conduct of its business as now conducted, including any Governmental Approvals under any applicable Environmental Law;

 

except, in the case of clauses (b) , (c) , (d)  and (e) , as would not have, individually or in the aggregate, a Partnership Material Adverse Effect and except, in each case, for such matters as will have been cured at or prior to the Closing.

 

4.4                                Brokerage Arrangements .  None of the Partnership Acquiring Entities has entered, directly or indirectly, into any Contract with any Person, other than the Partnership Financial Advisor (whose fees shall be paid by the Partnership), that would obligate Antero or any of its Affiliates to pay any commission, brokerage or “finder’s fee” or other fee in connection with this Agreement or the transactions contemplated hereby.

 

4.5                                New Common Units .  The New Common Units being issued at Closing, when issued in consideration for the contribution by Antero of the Contributed Assets as provided by this Agreement, will be duly authorized, validly issued, fully paid (to the extent required by the Partnership’s Organizational Documents) and nonassessable (except as such nonassessability may be affected by the Delaware Revised Uniform Limited Partnership Act) and free of any preemptive or similar rights (other than those set forth in the Partnership’s limited partnership agreement).

 

4.6                                Investment .  The Partnership is an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act. The Partnership Acquiring Entities are not acquiring the Contributed Assets with a view to or for sale in connection with any distribution thereof or any other security related thereto within the meaning of the Securities Act.  The Partnership Acquiring Entities are familiar with investments of the nature of the Contributed Assets, understand that this investment involves substantial risks, have adequately investigated the Contributed Assets and the Business, and have substantial knowledge and experience in

 

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financial and business matters such that they are capable of evaluating, and have evaluated, the merits and risks inherent in acquiring the Contributed Assets, and are able to bear the economic risks of such investment. The Partnership Acquiring Entities have had the opportunity to visit with Antero and meet with the officers of Antero and other representatives to discuss the business, assets, liabilities, financial condition, and operations of Antero Water, have received all materials, documents and other information that the Partnership Acquiring Entities deem necessary or advisable to evaluate the Business or the Contributed Assets, and have made their own independent examinations, investigations, analyses and evaluations of the Business and the Contributed Assets, including their own estimate of the value of the Contributed Assets.  The Partnership Acquiring Entities have undertaken such due diligence (including a review of the properties, liabilities, books, records and contracts of Antero Water) as they deem adequate. The Partnership Acquiring Entities acknowledge that the Water Interests have not been registered under applicable federal and state securities laws and that the Water Interests may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is registered under applicable federal and state securities laws or pursuant to an exemption from registration under any federal or state securities laws.

 

4.7                                No Other Representations or Warranties; Schedules .  Except as set forth in this Article IV , none of the Partnership Acquiring Entities makes any other express or implied representation or warranty with respect to the New Common Units or the transactions contemplated by this Agreement, and disclaims any other representations or warranties. The disclosure of any matter or item in any schedule to this Agreement shall not be deemed to constitute an acknowledgment that any such matter is required to be disclosed.

 

ARTICLE V
COVENANTS, ETC.

 

5.1                                Conduct of the Business .  Antero covenants and agrees that from and after the execution of this Agreement and until the Closing, except (i) as expressly contemplated by this Agreement, (ii) as required by applicable Law or (iii) with the prior written consent of the Partnership (which consent shall not be unreasonably withheld, conditioned or delayed):

 

(a)                                  Antero will not, and will not permit any of its Subsidiaries to, sell, transfer, assign, lease, convey or otherwise dispose of any of the Water Interests or Water Assets except in the ordinary course of operating the Business;

 

(b)                                  Antero will, and will cause Antero Water to, use commercially reasonable efforts to maintain the applicable Water Assets in such working order and condition as is consistent with past practice;

 

(c)                                   Antero will, and will cause Antero  Water to, use commercially reasonable efforts to conduct the Business in the ordinary course consistent with past practices;

 

(d)                                  Antero will not, and will not permit Antero Water to, permit any Lien to be imposed on the Water Interests or the Water Assets, other than Permitted Liens;

 

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(e)                                   Antero will not, and will not permit Antero Water to, adopt any material change in Tax methods, principles or elections;

 

(f)                                    Antero will not, and will not permit Antero Water to, acquire, commence or conduct any new activity that would cause the representation in Section 3.13(g)  to be untrue at Closing

 

(g)           Commencing on the Effective Date, Antero will not, and will not permit Antero Water to, pay any indebtedness outstanding under the Water Credit Facility; and

 

(h)          Commencing on the Effective Date, (i) Antero will not permit Antero Water to make any distribution with respect to its equity interests and (ii) Antero will not, and will not permit Antero Water to, make any distribution with respect to any daily cash sweep from Antero Water accounts pursuant to the Antero cash management program.

 

5.2                                Financial Statements; Financing Cooperation .

 

(a)                                  Antero shall permit the Partnership and its representatives to contact Antero’s accountants, auditors and employees, and shall cause such accountants, auditors and employees to discuss, cooperate and provide information reasonably requested by the Partnership or its representatives, in order for the Partnership to prepare audited and unaudited historical financial statements for the Water Assets and the Business and pro forma financial statements of the Partnership, in each case that meet the requirements of Regulation S-X promulgated under the Securities Act and within the timeframe specified for the Partnership to file such financial statements on Form 8-K under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.  Antero shall cause its accountants, auditors and employees to cooperate with the Partnership with regards to responding to any comments from the Commission on the financial statements of the Water Assets and the Business. The Partnership shall be responsible for and shall pay for or reimburse Antero for all costs incurred by Antero in connection with the external audit of any such financial statements (including reasonable accountants’ fees) incurred after the date hereof. The obligations of Antero under this Section 5.2 shall survive for three (3) years after the Closing.

 

(b)                                  From and after the date of this Agreement, Antero shall, and shall cause each of its Subsidiaries to, use commercially reasonable efforts to cause its and their representatives (including its and their auditors) to provide all customary cooperation as reasonably requested by the Partnership to assist the Partnership in the arrangement of any bank debt financing or any capital markets debt or equity financing as reasonably requested by the Partnership.

 

5.3                                Independent Investigation .  The Partnership acknowledges that in making the decision to enter into this Agreement and to consummate the transactions contemplated hereby, it has relied solely on its own independent investigation of the Business, the Water Interests and the Water Assets and upon the express written representations, warranties and covenants in this Agreement.  Without diminishing the scope of the express written representations, warranties and covenants of the Parties and without affecting or impairing its right to rely thereon, THE PARTNERSHIP ACKNOWLEDGES THAT NEITHER ANTERO NOR ANY OF ITS

 

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AFFILIATES OR REPRESENTATIVES HAS MADE ANY REPRESENTATION OR WARRANTY OTHER THAN THOSE CONTAINED IN ARTICLE III , AND ANTERO HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE WATER ASSETS OR THE BUSINESS (INCLUDING ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS).

 

5.4                                Post-Closing Receivables and Payments .

 

(a)                                  Should Antero or any of its Subsidiaries receive any payments attributable to accounts receivable of Antero Water or the Business that relate to the operations of the Business after the Effective Date, then Antero shall or shall cause its applicable Subsidiary to, within thirty (30) days of receipt of such payments, forward such payments to Antero Water.  Should the Partnership or any of its Subsidiaries receive any payments attributable to accounts receivable of Antero Water or the Business that relate to the operations of the Business on or prior to the Effective Date, then the Partnership shall or shall cause its applicable Subsidiary to, within thirty (30) days of receipt of such payments, forward such payments to Antero.

 

(b)                                  If any demand is made on Antero or any of its Subsidiaries to pay any invoice, account payable or other amount incurred in connection with the operation of the Business after the Effective Date, then the Partnership shall be responsible, or promptly reimburse Antero or such Subsidiaries, for the same. If any demand is made on the Partnership or any of its Subsidiaries to pay any invoice, account payable or other amount incurred in connection with the operation of the Business on or prior to the Effective Date, then Antero shall be responsible, or promptly reimburse the Partnership or such Subsidiaries, for the same.

 

5.5                                Further Assurances .  On and after the Closing Date, the Parties shall cooperate and use their respective commercially reasonable efforts to take or cause to be taken all appropriate actions and do, or cause to be done, all things necessary or appropriate to make effective the transactions contemplated by this Agreement and the other Transaction Documents, including the execution of any additional assignment or similar documents or instruments of transfer of any kind, the obtaining of consents which may be reasonably necessary or appropriate to carry out any of the provisions hereof and the taking of all such other actions as such Party may reasonably be requested to take by the other Party from to time to time, consistent with the terms of this Agreement or the other Transaction Documents, in order to effectuate the provisions and purposes of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby.

 

5.6                                NYSE Listing .  Prior to the Closing, the Partnership will use its reasonable best efforts to obtain approval for listing, subject to notice of issuance, of the New Common Units on the New York Stock Exchange.

 

5.7                                Tax Covenants .

 

(a)                                  The Parties agree that Antero shall bear the liability for any Asset Taxes attributable to (A) any taxable period ending on or prior to the Effective Date and (B) the portion

 

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of any Straddle Period ending on and including the Effective Date.  The Parties further agree that the Partnership shall bear the liability for any Asset Taxes attributable to (A) any taxable period beginning after the Effective Date and (B) the portion of any Straddle Period beginning after the Effective Date.

 

(b)                                  Proration of Straddle Period Taxes .  In the case of Taxes that are payable with respect to any Straddle Period, the portion of any such Taxes that is attributable to the portion of such Straddle Period ending on the Effective Date will be:

 

(i)                                      in the case of property or ad valorem or franchise Taxes or any other Taxes that are imposed on a periodic basis and which are measured by, or based solely upon capital, debt or a combination of capital and debt, deemed to be the amount of such Taxes for the entire Straddle Period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period), multiplied by a fraction the numerator of which is the number of calendar days in the portion of the period ending on and including the Effective Date and the denominator of which is the number of calendar days in the entire period; and

 

(ii)                                   in the case of all other Taxes, deemed equal to the amount which would be payable if the relevant Straddle Period ended on and included the Effective Date; provided that exemptions, allowances, or deductions that are calculated on an annual basis (including depreciation and amortization deductions) will be allocated between the portion of the Straddle Period ending on and including the Effective Date and the portion of the Straddle Period beginning after the Effective Date in proportion to the number of days in each period.

 

(c)                                   With respect to any Tax Return attributable to a Straddle Period that is required to be filed after the Closing Date by Antero Water or with respect to the Water Assets, the Partnership shall cause such Tax Return to be prepared, cause to be included in such Tax Return all items of income, gain, loss, deduction and credit required to be included therein, furnish a copy of such Tax Return to Antero, cause such Tax Return to be filed timely with the appropriate Tax Authority, and the Partnership shall be responsible for the timely payment of all Taxes due with respect to the period covered by such Tax Return (but shall have a right to recover from Antero the amount of Taxes attributable to the portion of the Straddle Period ending on and including the Effective Date pursuant to Section 5.7(a) ).

 

(d)                                  The Parties shall cooperate fully, and cause their Affiliates to cooperate fully, as and to the extent reasonably requested by the other Party, (i) to accomplish the apportionment of Tax liability described in this Section 5.7 , (ii) to respond to requests for the provision of any information or documentation within the knowledge or possession of such Party as reasonably necessary to facilitate compliance with financial reporting obligations arising under FASB Statement No. 109 (including compliance with Financial Accounting Standards Board Interpretation No. 48), and (iii) in connection with any audit, litigation or other proceeding (each a “ Tax Proceeding ”) with respect to Taxes.  Such cooperation shall include access to, the retention and (upon the other Party’s request) the provision of records and information which are

 

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reasonably relevant to any Tax Return or Tax Proceeding, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Partnership and Antero will use their respective commercially reasonable efforts to retain all books and records with respect to Tax matters pertinent to the Water Assets relating to any taxable period beginning before the Effective Date until the later of six years after the Effective Date or the expiration of the applicable statute of limitations of the respective taxable periods (including any extensions thereof), and to abide by all record retention agreements entered into with any Tax Authority.  Each of the Partnership and Antero agrees, upon request, to use their respective commercially reasonable efforts to obtain any certificate or other document from any Tax Authority or any other Person as may be necessary to mitigate, reduce or eliminate, to the extent permitted by applicable Law, any Tax that could be imposed with respect to the transactions contemplated by this Agreement.

 

(e)           Debt Financed Distribution.

 

(i)              To the extent (A) the sum of the Cash Consideration (for the avoidance of doubt, including any Additional Cash Consideration) and the Earn-Out Payments (such sum, the “ Total Cash Proceeds ”) exceeds (B) the amount, if any, of the Additional Cash Consideration minus any indebtedness assumed by the Partnership as of the Closing under the Water Credit Facility, the Partnership shall borrow an amount equal to such excess to finance the payments of such excess amount in a manner such that the proceeds of such borrowing are allocable to the payment of the Total Cash Proceeds pursuant to Treasury Regulation Section 1.707-5(b)(1) and Temporary Treasury Regulation Section 1.163-8T (such borrowing, and any “refinancing” of such borrowing treated as the liability it refinances pursuant to Treasury Regulation Section 1.707-5(c), the “ Traceable Partnership Debt ”). For the avoidance of doubt, the Total Cash Proceeds and the excess amount shall be calculated at the Closing using a value of zero for the Earn-Out Payments and shall be recalculated at the time of the payment of any Earn-Out Payment to take into account such Earn-Out Payment and any prior Earn-Out Payment.

 

(ii)           Antero and the Partnership intend that any payment of Total Cash Proceeds to Antero that is attributable to the Traceable Partnership Debt shall qualify as a “debt-financed transfer” described under Treasury Regulation Sections 1.707-3 and 1.707-5(b) (a “ Debt Financed Distribution ”).

 

(iii)        For a period of four years following the Closing Date, to the extent the total indebtedness of the Partnership exceeds the Traceable Partnership Debt (as calculated immediately after the then most-recent payment of any Total Cash Proceeds), the Partnership shall take reasonable steps to ensure (and shall cause its respective Affiliates to ensure) that the Traceable Partnership Debt will not be less than the entire outstanding principal balance of the Traceable Partnership Debt outstanding immediately after such payment.

 

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(iv)       Antero and the Partnership shall act (and shall cause their respective Affiliates to act) at all times in a manner consistent with the foregoing provisions of this Section 5.7(e) , except with the prior written consent of Antero or as otherwise required by applicable law following a Final Determination.

 

(f)            Reimbursement of Capital Expenditures .  Antero and the Partnership agree that all or a portion of any Total Cash Proceeds received by Antero pursuant to this Agreement is being paid to Antero as reimbursement for the capital expenditures (i) incurred by Antero (or deemed to be incurred by Antero for U.S. federal income tax purposes if incurred by Antero Water) with respect to the Water Assets before the Closing or otherwise in accordance with Section 2.2 of this Agreement (the “ Water Capital Expenditures ”) or (ii) incurred by Antero (or deemed to be incurred by Antero for U.S. federal income tax purposes if incurred by NewCo (as defined in the Initial Contribution Agreement)) with respect to the Gathering and Compression Assets (as defined in the Initial Contribution Agreement) before the Closing (as defined in the Initial Contribution Agreement).  Antero and the Partnership agree that to the extent any distribution subsequent to the Closing Date to Antero pursuant to Section 2.2 of the Initial Contribution Agreement exceeds any unreimbursed capital expenditures with respect to the Gathering and Compression Assets (as defined in the Initial Contribution Agreement), any such excess distribution will be treated as a reimbursement of the then unreimbursed Water Capital Expenditures.

 

(g)           The Parties intend that for U.S. federal income tax purposes, (i) the contribution of the Contributed Assets shall be treated as a contribution by Antero to the Partnership pursuant to Section 721(a) of the Code, subject to Section 707 of the Code, and (ii) the payment of the Total Cash Proceeds shall qualify as a Debt Financed Distribution to the extent set forth in Section 5.7(e)(ii) . Any payment of Total Cash Proceeds in excess of the amount treated as a Debt Financed Distribution shall be treated as a reimbursement of Antero’s preformation expenditures within the meaning of Treasury Regulation Section 1.707-4(d) to the greatest extent applicable and in accordance with Section 5.7(f) . The Parties agree to file all Tax Returns and otherwise act at all times in a manner consistent with the foregoing provisions of this Section 5.7(g) , except with the prior written consent of Antero or as otherwise required by applicable law following a Final Determination, including disclosing the distribution of the Total Cash Proceeds in accordance with the requirements of Treasury Regulations Section 1.707-3(c)(2).

 

5.8                                Consents .

 

(a)          Antero shall use commercially reasonable efforts to obtain prior to the Closing any Consents necessary to cause (i) the transfer and assignment of the Water Assets (other than the Treatment Assets) and associated liabilities to Antero Water prior to the Closing, (ii) the contribution, assignment, transfer and conveyance of the Water Interests to the Partnership at Closing and (iii) the contribution, assignment, transfer and conveyance of the Treatment Assets to Antero Treatment at Closing.

 

(b)                                  If, following the date hereof but prior to the Closing Date, either Party discovers any Consent that is not set forth on Schedule 3.4 (such discovered consent, an

 

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“ Unscheduled Consent ”), such Party shall notify the other Party thereof and Antero shall promptly send to the holder of such Unscheduled Consent a notice in compliance with the contractual provisions applicable to such Unscheduled Consent seeking such holder’s consent to the transactions contemplated by the Transaction Documents.

 

(c)           If and to the extent that the valid and complete contribution, assignment, transfer or conveyance of any Water Asset (including any Contract or Permit) (i) to Antero Water, (ii) to Antero Treatment or (iii) indirectly as part of the contribution of the Water Interests to the Partnership would (x) be a violation of applicable Law, or (y) give rise to any requirement to obtain a consent of a third Person, as applicable, that has not been obtained or made by the Closing and the failure to obtain such consent would cause the contribution, assignment, transfer or conveyance thereof to be void or voidable or would result in the termination of the underlying agreement or instrument giving rise to such consent obligation (any consent satisfying either clause (x) or (y) above, a “ Required Consent ”), then, unless the Parties shall otherwise mutually determine, the transfer or assignment of the Water Asset contemplated by clause (i), (ii) or (iii), as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Required Consents have been obtained or made.  Notwithstanding the foregoing, any such Water Assets shall continue to constitute Water Assets for all other purposes of this Agreement.

 

(d)                                  If any transfer or assignment of any Water Asset intended to be transferred or assigned from Antero to Antero Water or Antero Treatment, as the case may be, is not consummated on or prior to the Closing, whether as a result of the provisions of Section 5.8(c)  or for any other reason, then, insofar as reasonably possible, Antero or its applicable Subsidiary retaining such Water Asset shall thereafter hold such Water Asset for the use, benefit and/or burden of the Partnership (at the expense and for the account of the Partnership) until such time as such transfer or assignment can be completed; provided , however , that Antero or its applicable Subsidiary shall hold such Water Asset for the use, benefit and/or burden of the Partnership at its own expense if the reason the transfer or assignment is not consummated is the failure to obtain any Required Consent.  In addition, Antero or its applicable Subsidiary shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Water Asset in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the Partnership in order to place the Partnership in a substantially similar position as if such Water Asset had been transferred or assigned as contemplated hereby and so that all the benefits and burdens relating to such Water Asset, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such Water Asset, as the case may be, and all costs and expenses related thereto, shall inure from and after the Closing to the Partnership.

 

(e)                                   From and after the date hereof, each Party shall, and Antero shall (up to Closing) and the Partnership shall (after Closing), cause Antero Water and Antero Treatment to use its commercially reasonable endeavors to cooperate with the other Party in seeking to obtain each Customary Post-Closing Consent to the extent not previously obtained.

 

5.9                                Access .  Prior to the Closing but after the date of execution of this Agreement, Antero shall permit, and shall cause its Affiliates to permit, the Partnership and its respective

 

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authorized representatives to (i) have reasonable access, during regular business hours upon reasonable prior notice, to the Water Assets and records relating thereto as the Partnership and its Representatives may reasonably request, (ii) inspect and make copies of the Water Asset records and all other documents and information relating predominately to the Business from time to time as reasonably requested by the Partnership and its representatives and (iii) without limiting the foregoing, meet with designated employees of Antero as reasonably requested by the Partnership; provided, however, that, in each case, any such access shall be conducted in such a manner as not to interfere unreasonably with the operation of the businesses of Antero or its Affiliates and shall not require Antero to waive any applicable privilege (including attorney-client privilege) nor to violate any contractual obligation.

 

ARTICLE VI
CONDITIONS TO CLOSING

 

6.1                                Conditions to Each Party’s Obligation to Effect the Transactions .  The respective obligation of each Party to proceed with the Closing is subject to the satisfaction or waiver by each of the Parties (subject to applicable Laws) on or prior to the Closing Date of all of the following conditions:

 

(a)                                  all necessary filings with and consents (other than Customary Post-Closing Consents) of any Governmental Authority required for the consummation of the transactions contemplated by this Agreement and the other Transaction Documents shall have been made and obtained; provided, however, that, prior to invoking this condition, the invoking party shall have used commercially reasonable efforts to make or obtain such filings and consents;

 

(b)                                  no Party shall be subject to any decree, final non-appealable order or injunction of a court of competent jurisdiction that prohibits the consummation of the transactions contemplated by this Agreement and the other Transaction Documents and no Law enacted, entered, or issued by any Governmental Authority, or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, shall be in effect; and

 

(c)                                   the New Common Units shall have been approved for listing on The New York Stock Exchange, subject to official notice of issuance.

 

6.2                                Conditions to the Obligation of the Partnership Acquiring Entities .  The obligation of the Partnership Acquiring Entities to proceed with the Closing is subject to the satisfaction or waiver by the Partnership on or prior to the Closing Date of the following conditions:

 

(a)                                  Antero shall have performed, in all material respects, the covenants and agreements contained in this Agreement required to be performed by it on or prior to the Closing Date;

 

(b)                                  (i) the Fundamental Representations shall be true and correct (without regard to qualifications as to materiality or Material Adverse Effect contained therein) in all material respects as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), and (ii) the other

 

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representations and warranties of Antero made in this Agreement shall be true and correct (without regard to qualifications as to materiality or Material Adverse Effect contained therein) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except in the case of clause (ii)  where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Material Adverse Effect;

 

(c)                                   Antero shall have delivered to the Partnership a certificate dated the Closing Date and signed by an authorized officer of Antero confirming the foregoing matters set forth in clauses (a)  and (b)  of this Section 6.2 (the “ Antero Closing Certificate ”);

 

(d)                                  Antero shall have delivered or caused the delivery of the Closing deliverables set forth in Section 7.2 ;

 

(e)                                   between the date hereof and the Closing Date, there shall not have been a Material Adverse Effect; and

 

(f)                                    the Financing shall have closed concurrently with the Closing.

 

6.3                                Conditions to the Obligation of Antero .  The obligation of Antero to proceed with the Closing is subject to the satisfaction or waiver by Antero on or prior to the Closing Date of the following conditions:

 

(a)                                  the Partnership Acquiring Entities shall have performed, in all material respects, the covenants and agreements contained in this Agreement required to be performed by them on or prior to the Closing Date;

 

(b)                                  the representations and warranties of the Partnership Acquiring Entities made in this Agreement shall be true and correct (without regard to qualifications as to materiality or Partnership Material Adverse Effect contained therein) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Partnership Material Adverse Effect;

 

(c)                                   the Partnership shall have delivered to Antero a certificate dated the Closing Date and signed by an authorized officer of the General Partner confirming the foregoing matters set forth in clauses (b)  and (c)  of this Section 6.3 (the “ Partnership Closing Certificate ”);

 

(d)                                  the Partnership shall have delivered or caused the delivery of the Closing deliverables set forth in Section 7.3 ;

 

(e)                                   between the date hereof and the Closing Date, there shall not have been a Partnership Material Adverse Effect; and

 

(f)                                    the Financing shall have closed concurrently with the Closing.

 

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ARTICLE VII
CLOSING

 

7.1                                Closing .  Subject to the terms and conditions of this Agreement and unless otherwise agreed in writing by Antero and the Partnership, the closing (the “ Closing ”) of the transactions contemplated by this Agreement will be held at the offices of Vinson & Elkins L.L.P., 1001 Fannin Street, Suite 2500, Houston, Texas at 9:00 a.m., Houston, Texas time on the date that is three business days immediately following  the date of fulfillment or waiver (in accordance with the provisions hereof) of the last to be fulfilled or waived of the conditions set forth in Sections 6.1 , 6.2 and 6.3 (other than those conditions that by their nature are to be fulfilled at the Closing, but subject to the fulfillment or waiver of such conditions).  The date on which the Closing occurs is referred to as the “ Closing Date .”

 

7.2                                Deliveries by Antero .  At the Closing, Antero will deliver (or cause to be delivered) to the Partnership the following:

 

(a)                                  a counterpart to the Assignment of Water Interest, duly executed by Antero;

 

(b)                                  a counterpart to the Assignment and Bill of Sale of Treatment Assets, duly executed by Antero;

 

(c)                                   a counterpart to the Water Services Agreement, duly executed by Antero;

 

(d)                                  a counterparty to the Secondment Agreement, duly executed by Antero;

 

(e)                                   a counterpart to the Services Agreement, duly executed by Antero;

 

(f)                                    the Antero Closing Certificate, duly executed by an officer of Antero;

 

(g)                                   a certification of non-foreign status executed by Antero in the form prescribed in Treasury Regulations Section 1.1445-2(b)(2); and

 

(h)                                  such other documents, certificates and other instruments as may be reasonably requested by the Partnership prior to the Closing Date to carry out the intent and purposes of this Agreement.

 

7.3                                Deliveries by the Partnership Acquiring Entities .  At the Closing, the Partnership Acquiring Entities will deliver (or cause to be delivered) to Antero the following:

 

(a)                                  (x) the Cash Consideration, by wire transfer of immediately available funds to an account specified by Antero, and (y) the New Common Units, by issuance of such New Common Units (in book-entry form) to Antero, by instruction to the Partnership’s transfer agent or otherwise, and evidence of such issuance that is reasonably satisfactory to Antero, each as set forth in Section 2.2 ;

 

(b)                                  a counterpart to the Assignment of Water Interest, duly executed by the Partnership;

 

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(c)                                   a counterpart to the Assignment and Bill of Sale of Treatment Assets, duly executed by Antero Treatment;

 

(d)                                  a counterpart to the Water Services Agreement, duly executed by Antero Water;

 

(e)                                   a counterparty to the Secondment Agreement, duly executed by the Partnership;

 

(f)                                    a counterpart to the Services Agreement, duly executed by the Partnership and the General Partner;

 

(g)                                   the Partnership Closing Certificate, duly executed by an officer of the General Partner; and

 

(h)                                  such other documents, certificates and other instruments as may be reasonably requested by Antero prior to the Closing Date to carry out the intent and purposes of this Agreement.

 

ARTICLE VIII
INDEMNIFICATION

 

8.1                                Indemnification of Antero and Other Parties .  From and after the Closing Date, subject to the other provisions of this Article VIII , the Partnership shall indemnify and hold Antero and its Affiliates, directors, officers, employees, agents and representatives (together with Antero, the “ Antero Indemnitees ”) harmless from and against any and all damages, losses, deficiencies, costs, expenses, obligations, fines, expenditures, claims and liabilities, including court costs and reasonable attorneys’, accountants’ or other experts’ fees and reasonable expenses of investigation, defending and prosecuting Litigation (collectively, the “ Damages ”), suffered by the Antero Indemnitees as a result of, caused by, arising out of, or in any way relating to (a) any breach of a representation or warranty of the Partnership Acquiring Entities in this Agreement, (b) any breach of any agreement or covenant under this Agreement on the part of the Partnership Acquiring Entities, (c) any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party against Antero or any of its Affiliates that pertains to the business or operations of Antero Water or the ownership of the Contributed Assets, except in the case of this clause (c), to the extent covered by Section 8.2(c)  or arising out of a breach by Antero of any of the representations, warranties or covenants of Antero set forth in this Agreement, or (d) Environmental Law to the extent resulting from and limited to the portion attributable to the operation or ownership of the Business or the Water Assets by the Partnership or any of its Subsidiaries and occurring on or after the Closing Date.

 

8.2                                Indemnification of the Partnership and Other Parties .  From and after the Closing Date, subject to the other provisions of this Article VIII , Antero shall indemnify and hold the General Partner, the members of the Partnership Group and their respective directors, officers, employees, agents and representatives (together with the Partnership, the “ Partnership Indemnitees ”) harmless from and against any and all Damages suffered by the Partnership Indemnitees as a result of, caused by, arising out of, or in any way relating to (a) any breach of a representation or warranty of Antero in this Agreement except, in the case of this clause (a) , to

 

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the extent covered by Section 8.1(d) , (b) any breach of any agreement or covenant in this Agreement on the part of Antero, (c) Environmental Law to the extent resulting from and limited to the portion attributable to Antero’s operation or ownership of the Business or the Water Assets and occurring before the Closing Date and (d) the Excluded Assets and Excluded Liabilities.

 

8.3                                Indemnification Procedures .

 

(a)                                  Each indemnified party agrees that promptly after it becomes aware of facts giving rise to a claim by it for indemnification pursuant to this Article VIII with respect to any matter as to which it claims to be entitled to indemnity under the provisions of this Agreement, such indemnified party must assert its claim for indemnification under this Article VIII (each, an “ Indemnity Claim ”) by providing a written notice (a “ Claim Notice ”) to the indemnifying party allegedly required to provide indemnification protection under this Article VIII specifying, in reasonable detail, the nature and basis for such Indemnity Claim ( e.g. , the underlying representation, warranty, covenant or agreement alleged to have been breached).  Such notice shall include a demand for indemnification under this Agreement.  Notwithstanding the foregoing, an indemnified party’s failure to send or delay in sending a third party Claim Notice will not relieve the indemnifying party from liability hereunder with respect to such Indemnity Claim except to the extent the indemnifying party is prejudiced by such failure or delay and except as is otherwise provided herein.  Except as specifically provided herein, each indemnified party’s rights and remedies set forth in this Agreement will survive the Closing.

 

(b)                                  In the event of the assertion of any third-party Indemnity Claim for which, by the terms hereof, an indemnified party seeks indemnification from an indemnifying party, the indemnifying party will have the right, at such indemnifying party’s expense, to assume the defense of same, including the appointment and selection of counsel on behalf of the indemnified party so long as such counsel is reasonably acceptable to the indemnified party.  If the indemnifying party elects to assume the defense of any such third-party Indemnification Claim, it shall within 20 business days of its receipt of the Claim Notice notify the indemnified party in writing of its intent to do so.  Any such contest may be conducted in the name and on behalf of the indemnifying party or the indemnified party as may be appropriate.  The indemnifying party will have the right to settle or compromise or take any corrective or remediation action with respect to any such Indemnification Claim by all appropriate proceedings, which proceedings will be prosecuted by the indemnifying party to a final conclusion or settled at the discretion of the indemnifying party.  The indemnified party will be entitled, at its own cost, to participate with the indemnifying party in the defense of any such Indemnity Claim.  If the indemnifying party assumes the defense of any such third-party Indemnity Claim but fails to reasonably prosecute such Indemnity Claim, or if the indemnifying party does not assume the defense of any such Indemnity Claim, the indemnified party may assume control of such defense and in the event it is determined pursuant to the procedures set forth in this Article VIII that the Indemnity Claim was a matter for which the indemnifying party is required to provide indemnification under the terms of this Article VIII , the indemnifying party will bear the reasonable costs and expenses of such defense (including reasonable attorneys’ fees and expenses).

 

(c)                                   If requested by the indemnifying party, the indemnified party agrees to cooperate with the indemnifying party and its counsel in contesting any third-party Indemnity Claim that the indemnifying party elects to contest or, if appropriate, in making any counterclaim

 

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against the person asserting the third-party Indemnity Claim, or any cross-complaint against any person, and the indemnifying party will reimburse the indemnified party for reasonable expenses incurred by it in so cooperating.  At no cost or expense to the indemnified party, the indemnifying party shall reasonably cooperate with the indemnified party and its counsel in contesting any third-party Indemnity Claim.

 

(d)                                  Notwithstanding anything to the contrary in this Agreement, the indemnifying party will not be permitted to settle, compromise, take any corrective or remedial action or enter into an agreed judgment or consent decree, in each case, that subjects the indemnified party to any injunctive or other non-monetary relief or any criminal liability, requires an admission of guilt or wrongdoing on the part of the indemnified party or imposes any continuing obligation on or requires any payment from the indemnified party without the indemnified party’s prior written consent.

 

8.4                                Calculation and Payment of Damages .

 

(a)                                  In calculating amounts payable to an indemnified party for a claim for indemnification hereunder, the amount of any indemnified Damages shall be determined without duplication of any other Damages for which an indemnification claim has been made or could be made under any other representation, warranty, covenant or agreement and shall be computed net of (i) payments actually recovered under any insurance policy with respect to such Damages or (ii) any prior or subsequent actual recovery from any Person other than the applicable indemnifying party with respect to such Damages.

 

(b)                                  The indemnification required hereunder shall be made by periodic payments of the amount thereof during the course of the investigation or defense, within 10 days as and when reasonably specific bills are received or loss, liability, claim, damage or expense is incurred and reasonable evidence thereof is delivered.

 

8.5                                Waiver of Certain Damages .  Notwithstanding any other provision of this Agreement, in no event shall any Party be liable pursuant to this Article VIII for punitive, special, indirect, consequential, remote, speculative or lost profits damages of any kind or nature, including any damages based on diminution in value or any other damages based on a multiple of earnings or other multiple, regardless of the form of action through which such damages are sought, except for any such damages recovered by any third party against an indemnified party in respect of which such indemnified party would otherwise be entitled to indemnification pursuant to the terms hereof.

 

8.6                                Limitations on Indemnification .

 

(a)                                  To the extent the Partnership Indemnitees are entitled to indemnification for Damages pursuant to Section 8.2(a)  or 8.2(c) , Antero shall not be liable for those Damages unless the aggregate amount of Damages exceeds $10,524,500(the “ Deductible ”), and then only to the extent of any such excess; provided , however , that Antero shall not be liable for Damages pursuant to Section 8.2(a)  or 8.2(c)  that exceed, in the aggregate, $105,245,000 (the “ Cap ”) less the Deductible.

 

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(b)                                  Notwithstanding clause (a)  above, (i) to the extent the Partnership Indemnitees are entitled to indemnification for Damages for claims arising from fraud or Damages for Taxes arising from a breach of the representations or warranties in Section 3.13 , Antero shall be fully liable for such Damages without regard to the Deductible or the Cap and (ii) to the extent the Partnership Indemnitees are entitled to indemnification for Damages for claims arising from a breach of a Fundamental Representation, Antero shall be fully liable for such Damages without regard to the Deductible or the Cap.

 

(c)                                   To the extent the Antero Indemnitees are entitled to indemnification for Damages pursuant to Section 8.1(a)  or (d) , the Partnership shall not be liable for those Damages unless the aggregate amount of Damages exceeds the Deductible; provided , however , that the Partnership shall not be liable for Damages pursuant to Section 8.1(a)  or (d)  that exceed, in the aggregate, the Cap less the Deductible.

 

(d)                                  Notwithstanding clause (c)  above, to the extent the Antero Indemnitees are entitled to indemnification for Damages for claims arising from a breach of a Partnership Fundamental Representation, the Partnership shall be fully liable for such Damages without regard to the Deductible or the Cap.

 

8.7                                Survival .

 

(a)                                  The liability of Antero for (i) the breach of any of the representations and warranties of Antero set forth in Sections 3.1 , 3.2 , 3.7 , 3.11 , and 3.12 (the “ Fundamental Representations ”) and (ii) Damages under Section 8.2(d)  shall be indefinite.  The liability of Antero for the breach of any of the representations and warranties of Antero set forth in Article III other than the Fundamental Representations and the matters set forth in Sections 3.6 and 3.13 shall be limited to claims for which the Partnership delivers written notice to Antero on or before the date that is 18 months after the Closing Date. The liability of Antero for Damages for claims related to or arising from Taxes resulting from a breach of the covenants relating to Taxes set forth in this Agreement or a breach of the representations or warranties set forth in Section 3.13 shall be limited to claims for which the Partnership delivers written notice to Antero on or before the date that is ninety (90) days after the expiration of the applicable statute of limitations for assessment of the applicable Tax. The liability of Antero for Damages under Section 8.2(c)  or a breach of the representations and warranties set forth in Section 3.6 shall be limited to claims for which the Partnership delivers written notice to Antero on or before the date that is 24 months after the Closing Date.

 

(b)                                  The liability of the Partnership for the breach of any of the representations and warranties of the Partnership Acquiring Entities set forth in Sections 4.1 , 4.2 , 4.4 , 4.5 and 4.6 (the “ Partnership Fundamental Representations ”) shall be indefinite.  The liability of the Partnership for Damages arising under Section 8.1(d)  or a breach of the representations and warranties of the Partnership Acquiring Entities set forth in Article IV other than the Partnership Fundamental Representations shall limited to claims for which Antero delivers written notice to the Partnership on or before the date that is 24 months after the Closing Date.

 

(c)                                   Notwithstanding anything to the contrary in this Section 8.7 , if an indemnified party delivers written notice in reasonable detail to an indemnifying party of a claim

 

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for indemnification on or prior to the applicable expiration date for such claim, such claim shall survive until finally resolved.

 

8.8                                Mitigation .  The Parties agree that an indemnified party’s right to recourse under this Article VIII for any Damages shall be limited to the extent that such indemnified party would not have suffered such Damages had such indemnified party exercised commercially reasonable efforts to mitigate such Damages following the actual discovery by such indemnified party of the fact, event or circumstance giving rise to such Damages.

 

8.9                                Sole Remedy .  After the Closing, no Party shall have liability under this Agreement or the transactions contemplated hereby except as is provided in this Article VIII (other than claims or causes of action arising from fraud, and other than claims for specific performance or claims arising under any Transaction Documents (other than this Agreement) (which claims shall be subject to the liability provisions of such Transaction Documents)).

 

8.10                         Consideration Adjustment .  The Parties agree to treat any payments made pursuant to this Article VIII as an adjustment to the Cash Consideration for all Tax purposes, except as otherwise required by applicable Law following a Final Determination.

 

ARTICLE IX
TERMINATION

 

9.1                                Events of Termination .  This Agreement may be terminated at any time prior to the Closing:

 

(a)                                  by mutual written consent of Antero and the Partnership;

 

(b)                                  by either Antero or the Partnership in writing after October 30, 2015, if the Closing has not occurred by that date, provided that as of such date neither the terminating Party nor any of its Affiliates are in material breach of its representations, warranties or covenants under this Agreement;

 

(c)                                   by either Antero or the Partnership in writing without prejudice to other rights and remedies the terminating Party or its Affiliates may have (provided the terminating Party and its Affiliates are not otherwise in material default or breach of this Agreement, or have not failed or refused to close without justification hereunder), if the other Party or its Affiliates shall have (i) materially failed to perform its covenants or agreements contained herein required to be performed by such Party or its Affiliates on or prior to the Closing Date or (ii) materially breached any of its representations or warranties contained herein; provided , however , that in the case of clauses (i)  or (ii) , the breaching Party shall have a period of 30 days following written notice from the non-defaulting Party to cure any breach of this Agreement if the breach is curable; or

 

(d)                                  by either Antero or the Partnership in writing, if there shall be any order, writ, injunction or decree of any Governmental Authority binding on the Parties that prohibits or restrains any Party from consummating the transactions contemplated hereby; provided , however , that the applicable Party shall have used its reasonable best efforts to have any such

 

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order, writ, injunction or decree removed but it shall not have been removed within 30 days after entry by the Governmental Authority.

 

9.2                                Effect of Termination .  In the event of the termination of this Agreement by a Party as provided in Section 9.1 , this Agreement shall thereafter become void except for this Section 9.2 and Section 10.2 .  Nothing in this Section 9.2 shall be deemed to release any Party from any liability for any willful and intentional breach by such Party of the terms and provisions of this Agreement or to impair any rights of any Party under this Agreement.  If this Agreement is terminated by either Party pursuant to Section 9.1(c) , then the other Party shall reimburse such terminating Party for such terminating Party’s and its Affiliates out-of-pocket expenses incurred in connection with the negotiation, execution and performance of this Agreement (including, where applicable, (i) legal fees and fees paid to Antero Financial Advisor, in either case incurred by the Partnership or the Conflicts Committee and (ii) legal fees and fees paid to the Partnership Financial Advisor, in either case incurred by Antero or the Special Committee).

 

ARTICLE X
MISCELLANEOUS

 

10.1                         Expenses .  Unless otherwise specifically provided in this Agreement, each Party shall pay its own expenses incident to this Agreement or the other Transaction Documents and all action taken in preparation for effecting the provisions of this Agreement and the other Transaction Documents.

 

10.2                         Notices .  Unless otherwise specifically provided in this Agreement, any notice, request, instruction, correspondence or other document to be given under or in relation to this Agreement shall be made in writing and shall be deemed to have been properly given if:  (i) personally delivered (with written confirmation of receipt); or (ii) delivered by a recognized overnight delivery service (delivery fees prepaid), in either case to the appropriate address set forth below:

 

If to Antero or any Subsidiary of Antero, addressed to:

 

Antero Resources Corporation (or applicable Subsidiary)

1615 Wynkoop Street

Denver, Colorado 80202

Attn: Chief Financial Officer

Facsimile: (303) 357-7315

 

If to the Partnership Acquiring Entities , addressed to:

 

Antero Midstream Partners LP and/or Antero Treatment LLC

c/o Antero Resources Midstream Management LLC

1615 Wynkoop Street

Denver, Colorado 80202

Attn: Chief Financial Officer

Facsimile: (303) 357-7315

 

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Any Party may change any address to which notice is to be given to it by giving notice as provided above of such change of address.

 

10.3                         Governing Law and Venue .

 

(a)                                  This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Colorado without regard to choice of law principles.

 

(b)                                  The Parties agree that the appropriate, exclusive and convenient forum for any disputes between the Parties arising out of this Agreement or the transactions contemplated hereby shall be in any state or federal court in City and County of Denver, Colorado, and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any proceeding arising out of or related to this Agreement.  The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts.

 

10.4                         Public Statements .  The Parties agree that prior to making any public announcement or statement with respect to this Agreement or the transaction represented herein, the Party desiring to make such public announcement or statement shall provide the other Party with a copy of the proposed announcement or statement prior to the intended release date of such announcement.  The other Party shall thereafter consult with the Party desiring to make the release, and the Parties shall exercise their reasonable best efforts to (a) agree upon the text of a joint public announcement or statement to be made by both such Parties or (b) in the case of a statement to be made solely by one Party, obtain approval of the other Party to the text of a public announcement or statement.  Nothing contained in this Section 10.4 shall be construed to require either Party to obtain approval of the other Party to disclose information with respect to this Agreement or the transaction represented herein to any Governmental Authority to the extent such disclosure is required by Applicable Law or necessary to comply with disclosure requirements of the Securities and Exchange Commission, New York Stock Exchange, or any other regulated stock exchange.

 

10.5                         Form of Payment .  All payments hereunder shall be made in United States dollars and, unless the Parties making and receiving such payments shall agree otherwise or the provisions hereof provide otherwise, shall be made by wire or interbank transfer of immediately available funds on the date such payment is due to such account as the Party receiving payment may designate at least three business days prior to the proposed date of payment.

 

10.6                         Entire Agreement; Amendments and Waivers .  This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the exhibits and schedules hereto, (a) constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof and (b) are not intended to confer upon any other Person any rights or remedies hereunder except as Article VIII or Article X contemplates or except as otherwise expressly provided herein or therein.  Each Party agrees that (i) no other Party (including its agents and representatives) has made any representation, warranty, covenant or agreement to or with such Party relating to this Agreement or the transactions contemplated hereby, other than those

 

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expressly set forth in the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the exhibits and schedules hereto, and (ii) such Party has not relied upon any representation, warranty, covenant or agreement relating to this Agreement or the transactions contemplated hereby other than those referred to in clause (i)  above.  No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the Parties.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.

 

10.7                         Binding Effect and Assignment .  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns, but neither this Agreement nor any of the rights, benefits or obligations hereunder shall be assigned, by operation of law or otherwise, by any Party without the prior written consent of the other Parties.

 

10.8                         Severability .  If any provision of this Agreement is determined to be void or unenforceable, in whole or in part, then (a) such provision shall be deemed inoperative to the extent it is deemed void or unenforceable, (b) the Parties agree to enter into such amendments to this Agreement in order to give effect, to the greatest extent legally possible, to the provision that is determined to be void or unenforceable and (c) the other provisions of this Agreement in all other respects shall remain in full force and effect and binding and enforceable to the maximum extent permitted by Applicable Law; provided, however, that in the event that a material term under this Agreement is so modified, the Parties will, timely and in good faith, negotiate to revise and amend this Agreement in a manner which preserves, as closely as possible, each Party’s business and economic objectives as expressed by the Agreement prior to such modification.

 

10.9                         Interpretation .

 

(a)                                  The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and therefore waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document.

 

(b)                                  The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited.  The words “this Article,” “this Section” and “this clause,” and words of similar import, refer only to the Article, Section or clause hereof in which such words occur.  The word “or” is exclusive, and the word “including” (in its various forms) means including without limitation.

 

(c)                                   Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.

 

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(d)                                  References herein to any Person shall include such Person’s successors and assigns; provided, however, that nothing contained in this clause (d) is intended to authorize any assignment or transfer not otherwise permitted by this Agreement.

 

(e)                                   References herein to any Law shall be deemed to refer to such Law as amended, reenacted, supplemented or superseded in whole or in part and in effect from time to time and also to all rules and regulations promulgated thereunder

 

(f)                                    References herein to any Contract mean such Contract as amended, supplemented or modified (including any waiver thereto) in accordance with the terms thereof, except that with respect to any Contract listed on any schedule hereto, all such amendments, supplements or modifications must also be listed on such schedule.

 

(g)                                   Each representation, warranty, covenant and agreement contained in this Agreement will have independent significance, and the fact that any conduct or state of facts may be within the scope of two or more provisions in this Agreement, whether relating to the same or different subject matters and regardless of the relative levels of specificity, shall not be considered in construing or interpreting this Agreement.

 

(h)                                  Unless otherwise expressly provided herein to the contrary, accounting terms shall have the meaning given by U.S. generally accepted accounting principles.

 

10.10                  Headings and Schedules .  The headings of the several Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.  The schedules referred to herein are attached hereto and incorporated herein by this reference, and the matters disclosed in those schedules shall be deemed to qualify the representation or warranty to which they expressly relate and any other representation or warranty, but only to the extent that it is reasonably apparent on its face that such disclosure is applicable to such other representation or warranty.  The Parties acknowledge and agree that (a) the schedules may include certain items and information solely for informational purposes for the convenience of the Parties and (b) the disclosure by any Party of any matter in any schedule shall not be deemed to constitute an acknowledgment by such Party that the matter is required to be disclosed by the terms of this Agreement or that the matter is material.

 

10.11                  Counterparts .  This Agreement may be executed in one or more counterparts, including electronic, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

10.12                  Determinations by the Partnership .  With respect to any notice, consent, approval or waiver that is required to be or may be taken or given by the Partnership (a) pursuant to the terms of this Agreement on or prior to the Closing Date or (b) pursuant to Article VIII after the

 

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Closing Date, such notice, consent, approval or waiver shall be taken or given by the Conflicts Committee on behalf of the Partnership.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first written above.

 

	ANTERO RESOURCES CORPORATION
	By:	/s/ Alvyn A. Schopp
	Name:	Alvyn A. Schopp
	Title:	Chief Administrative Officer, Regional Vice President and Treasurer
	ANTERO MIDSTREAM PARTNERS LP
	By:	Antero Resources Midstream Management LLC, its general partner
	By:	/s/ Alvyn A. Schopp
	Name:	Alvyn A. Schopp
	Title:	Chief Administrative Officer, Regional Vice President and Treasurer
	ANTERO TREATMENT LLC
	By:	/s/ Alvyn A. Schopp
	Name:	Alvyn A. Schopp
	Title:	Chief Administrative Officer, Regional Vice President and Treasurer

 

Signature page to Contribution Agreement

 

 

Exhibit A

 

Form of Assignment and Bill of Sale of Treatment Assets

 

 

ASSIGNMENT AND BILL OF SALE

 

This Assignment and Bill of Sale (this “ Assignment ”) is made from Antero Resources Corporation, a Delaware corporation (“ Assignor ”) to Antero Treatment LLC, a Delaware limited liability company, whose address is 1615 Wynkoop Street, Denver, Colorado 80202 (“ Assignee ”), and dated as of September [  ], 2015, but is effective as of 00:01 a.m. (Mountain Time) on October 1, 2015 (the “ Effective Time ”).  Assignor and Assignee are sometimes referred to in this Assignment individually as a “ Party ” and collectively as the “ Parties .” Capitalized terms used herein but not otherwise defined shall have the meanings given such terms in that certain Contribution, Conveyance and Assumption Agreement, dated as of September 17, 2015, by and among the Assignor, Antero Midstream Partners LP, a Delaware limited partnership (the “ Partnership ”), and Assignee (as amended, supplemented or restated from time to time, the “ Contribution Agreement ”).

 

RECITALS

 

WHEREAS, Assignor desires to assign to Assignee and Assignee desires to receive, assume and bear all of Assignor’s right, title and interest in and to the Treatment Assets (as defined below).

 

NOW, THEREFORE, for and in consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee agree as follows:

 

ARTICLE 1
ASSIGNMENT OF ASSETS

 

Section 1.1             Assignment of Treatment Assets .  Assignor hereby GRANTS, BARGAINS, ASSIGNS, CONVEYS AND TRANSFERS unto Assignee, with a warranty of title by, through and under Assignor but not otherwise, all of Assignor’s right, title and interest in and to the Treatment Assets.  For purposes hereof, “ Treatment Assets ” means those assets, contracts, rights, permits and properties owned or leased by Assignor and used primarily in connection with the construction, ownership, operation, use or maintenance of Assignor’s advanced wastewater treatment complex to be constructed in Doddridge County, West Virginia, including those assets set forth on Exhibit A and Schedule 1-2 of the Contribution Agreement, in each case, less and except the Excluded Assets.

 

TO HAVE AND TO HOLD the Treatment Assets, together with all and singular the rights, privileges, contracts and appurtenances, in any way appertaining or belonging thereto, unto Assignee, its successors and assigns, forever, subject, to the terms and conditions of this Assignment.

 

Section 1.2             Excluded Assets.  The Treatment Assets shall not include, and Assignor hereby excepts and reserves, all of the Excluded Assets.

 

 

“ Excluded Assets ”, as used in this Assignment, means all right, title and interest of Assignor and its Affiliates in and to any assets, properties, agreements and interests not included in the definition of Treatment Assets, as applicable, including:

 

(a)                                  the Upstream Assets;

 

(b)                                  all systems primarily used or intended for the gathering or transportation of Hydrocarbons;

 

(c)                                   all of Assignor’s (and its Affiliates’) corporate minute books, financial records and other business records to the extent such books and records are related to Assignor’s (or any of its Affiliates’) business generally or are otherwise not directly related to the Treatment Assets;

 

(d)                                  All claims for refunds, credits, loss carryforwards and similar Tax assets with respect to (i) Asset Taxes allocated to Assignor pursuant to Section 5.7(a) of the Contribution Agreement, (ii) Income Taxes of Assignor or any of its Affiliates or (iii) any Taxes attributable to any of the assets or properties described in the definition of Excluded Assets.

 

(e)                                   all personal computers and associated peripherals and all radio and telephone equipment (and licenses related thereto);

 

(f)                                    all of Assignor’s (and its Affiliates’) computer software, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property (except the Treatment Conveyed IP). and all rights in and to that certain License Agreement, dated November 10, 2014, between Assignor and the Partnership;

 

(g)                                   all documents and instruments of Assignor (or any of its Affiliates) that may be protected by an attorney-client privilege (other than title opinions and reports on status of title, in each case, with respect to title to any of the Treatment Assets);

 

(h)                                  all offices of Assignor and all personal property located therein;

 

(i)                                      all of the bonds, letters of credit, guarantees, deposits and other pre-payments posted by Assignor or any of its Affiliates with any Governmental Authorities or any other third parties;

 

(j)                                     all trade credits, receivables and all other proceeds, income or revenues attributable to the Treatment Assets with respect to any period of time prior to the Effective Time, or attributable to any of the assets and properties described in this definition of Excluded Assets with respect to any period of time;

 

(k)                                  all accounts (including bank accounts) and all cash on hand;

 

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(l)                                      any policy or agreement of insurance or indemnity agreement and any proceeds or awards therefrom;

 

(m)                              all assets of Antero Resources Midstream Management LLC and all assets of any Person that directly or indirectly holds any interest in Antero Resources Midstream Management LLC;

 

(n)                                  all assets described on Exhibit B ; and

 

(o)                                  any Gathering and Compression Assets (as defined in the Initial Contribution Agreement).

 

ARTICLE 2
DEFINED TERMS

 

Section 2.1             Defined Terms .

 

“ Excluded Liabilities ” means (a) (i) any and all Income Taxes imposed on Assignor or any of its Affiliates; the Asset Taxes allocable to Assignor pursuant to Section 5.7(a) of the Contribution Agreement; (ii) any Taxes imposed on or with respect to the Excluded Assets; and (iii) any and all other Taxes imposed on or with respect to the Treatment Assets for any taxable period (or portion thereof) ending prior to the Effective Time; and (b) the liabilities described on Schedule 1 to the Contribution Agreement.

 

“ including ” means including, without limitation.

 

“ Intellectual Property ” means (a) patents and patent applications; (b) trade secrets and confidential information, (c) copyrights, registered and unregistered; and (d) trademarks, service marks, trade names, trade dress, and domain names (“ Trademarks ”).

 

“ Liabilities ” means any direct or indirect liability, indebtedness, Damage, deficiency, Tax, interest, penalty, amount paid in settlement, judgment, assessment, guaranty or endorsement of or by any Person, in the case of each of the foregoing, whether absolute or contingent, matured or unmatured, asserted or unasserted, accrued or unaccrued, due or to become due, liquidated or unliquidated.

 

“ Treatment Conveyed IP ” means (a) all Intellectual Property (other than Trademarks) owned by Assignor primarily relating to the Treatment Assets and (b) the Intellectual Property described under the heading “Treatment Conveyed IP” in Schedule 1-2 of the Contribution Agreement, including all rights, claims and causes of action for past, present and future infringement and misappropriation of the Treatment Conveyed IP, including the right to seek injunctive relief and damages, and to collect and retain same.

 

“ Upstream Assets ” means all assets held by Assignor or an Affiliate of Assignor at any time in respect of the exploration, development and/or production of Hydrocarbons business of Assignor and its Affiliates, including all interests of Assignor or its Affiliates:

 

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(a)                                  in and to any oil and gas wells and leases, including all mineral interests, royalty interests, overriding royalty interests, production payments, other payments out of or measured by the value of oil and gas production, net profits interests, carried interests, farmout or farmin rights, options, subleases, and all other rights and interests that Assignor or its Affiliates have in and to any oil and gas leases, any lands pooled or unitized therewith and any oil and gas wells;

 

(b)                                  in and to (i) any Hydrocarbons, carbon dioxide or water or other non-Hydrocarbons in and under, or which may be produced and saved from or attributable to, the leases or lands referred to in clause (a)  above, or any interests pooled or unitized therewith; (ii) all agreements, contracts, and/or permits between Assignor and any third party to take or draw fresh water from any source; and (iii) any fresh water the subject of clause (b)(ii)  above;

 

(c)                                   in and to all Hydrocarbons in storage or existing in stock tanks, pipelines and/or plants (including inventory) on the gathering, compression, and/or transportation systems of Assignor and all carbon dioxide, water and other non-Hydrocarbons in storage or existing in stock tanks, pipelines and/or plants (including inventory);

 

(d)                                  with respect to the use and occupancy of the surface of and the subsurface depths under the lands and leases referred to in clause (a) , and rights of ingress and egress and similar rights and interests pertaining to, situated on or used in connection with such lands and leases;

 

(e)                                   in and to any oil, gas or mineral unitization, pooling, operating and communitization agreements, joint venture agreements, farmin and farmout agreements, exploration agreements, exchange agreements, declarations, orders, rules, regulations or other official acts of any Governmental Authority and the units created thereby, including all units voluntarily formed or formed under orders, regulations, rules or other official acts of any Governmental Authority having jurisdiction;

 

(f)                                    in and to all surface and subsurface personal property, equipment, machinery, fixtures, movable and immovable property and improvements on or appurtenant to the leases, lands or wells described in clause (a) , or used or obtained in connection with the exploration, development or operation of such leases, lands or wells, including any trucks and cars, drilling/workover rigs and rolling stock and all equipment, pipe and inventory that is not currently being used or currently designated for use in connection with the ownership or operation of the Treatment Assets (whether located on or off the Treatment Assets); and

 

(g)                                   in and to (i) that certain Gathering Agreement between Assignor and Antero Midstream LLC entered into effective as of December 1, 2013, and that certain Right of First Offer Agreement between Assignor and Antero

 

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Midstream LLC entered into effective as of the December 1, 2013, and (ii) any Transaction Document to which Assignor or an Affiliate of Assignor is or will be a party.

 

ARTICLE 3
DISCLAIMER OF WARRANTIES

 

Section 3.1             EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS ASSIGNMENT OR IN THE CONTRIBUTION AGREEMENT, (I) ASSIGNOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED AND (II) ASSIGNOR EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO ASSIGNEE OR ITS EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO AN ASSIGNEE BY ANY OFFICER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF ASSIGNOR).

 

Section 3.2             EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS ASSIGNMENT OR IN THE CONTRIBUTION AGREEMENT, ASSIGNOR EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO ANY OF THE TREATMENT ASSETS, (II) ANY ESTIMATES OF THE VALUE OF THE TREATMENT ASSETS OR FUTURE REVENUES GENERATED BY THE TREATMENT ASSETS, (III) THE CONDITION, QUALITY, SUITABILITY OR MARKETABILITY OF THE TREATMENT ASSETS, (IV) THE CONTENT, CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY ASSIGNOR OR THIRD PARTIES WITH RESPECT TO THE TREATMENT ASSETS, AND (V) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO ASSIGNEE OR ITS EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THIS ASSIGNMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO. EXCEPT AS AND TO THE EXTENT EXPRESSLY REPRESENTED OTHERWISE IN THIS ASSIGNMENT OR IN THE CONTRIBUTION AGREEMENT, ASSIGNOR FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF THE TREATMENT ASSETS, RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, IT BEING ACKNOWLEDGED BY THE PARTIES THAT, EXCEPT AS AND TO THE EXTENT OTHERWISE PROVIDED IN THIS ASSIGNMENT OR IN THE CONTRIBUTION AGREEMENT, ASSIGNEE SHALL BE DEEMED TO HAVE OBTAINED THE TREATMENT ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE) AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE

 

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MADE SUCH INSPECTIONS OF THE TREATMENT ASSETS AS ASSIGNEE DEEMS APPROPRIATE .

 

Section 3.3             Environmental Matters .  EXCEPT AS AND TO THE EXTENT OTHERWISE PROVIDED IN THE CONTRIBUTION AGREEMENT, ASSIGNOR HAS NOT MADE ANY REPRESENTATION OR WARRANTY TO ASSIGNEE REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, ENVIRONMENTAL PERMITS, THE RELEASE OR THREATENED RELEASE OF HAZARDOUS MATERIALS INTO THE ENVIRONMENT, EXPOSURE TO HAZARDOUS MATERIALS, OR THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE TREATMENT ASSETS, AND NOTHING IN THIS ASSIGNMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY .

 

Section 3.4             THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE 3 ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSE OF SUCH APPLICABLE LAW .

 

ARTICLE 4
MISCELLANEOUS

 

Section 4.1             Assignment Subject to Contribution Agreement .  This Assignment is made in accordance with and is subject to the terms, covenants and conditions contained in the Contribution Agreement, a copy of which can be obtained from Assignee at the above referenced address.  The terms and conditions of the Contribution Agreement are incorporated herein by reference, and in the event of a conflict between the provisions of the Contribution Agreement and this Assignment, the provisions of the Contribution Agreement shall control.  The execution and delivery of this Assignment by Assignor, and the execution and acceptance of this Assignment by Assignee, shall not operate to release or impair any surviving rights or obligations of Assignor or Assignee under the Contribution Agreement.

 

Section 4.2             Assumed Liabilities .  Assignee hereby assumes and agrees to fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid and discharged) all Liabilities, known or unknown, with respect Assignee’s interests in the Treatment Assets to the extent assigned to Assignee herein, subject to, and as limited by, the terms of the Contribution Agreement and as described in Schedule 1-2 thereof; provided that Assignee does not assume any Liabilities of Assignor resulting from, relating to or arising out of the Excluded Liabilities or, for the avoidance of doubt, relating to or arising out of the Excluded Assets.

 

Section 4.3             Separate Assignments .  Where separate assignments or deeds of the Treatment Assets have been, or will be, executed for filing with and approval by applicable Governmental Authorities, any such separate assignments or deeds (a) shall evidence the Assignment and assignment of the Treatment Assets herein made, and shall not constitute any additional Assignment or assignment of the Treatment Assets, (b) are not intended to modify, and shall not modify, any of the terms, covenants and conditions, or limitations on warranties, set forth

 

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in this Assignment and are not intended to create, and shall not create, any representations, warranties or additional covenants of or by Assignor to Assignee, and (c) shall be deemed to contain all of the terms and provisions of this Assignment, as fully and to all intents and purposes as though the same were set forth at length in such separate assignments.

 

Section 4.4             Governing Law .  EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE OF WEST VIRGINIA, PENNSYLVANIA OR OHIO ARE MANDATORILY APPLICABLE TO THIS ASSIGNMENT IN CONNECTION WITH THE CONVEYANCES OF PROPERTY INTERESTS INVOLVING REAL PROPERTY LOCATED IN THE STATE OF WEST VIRGINIA, PENNSYLVANIA OR OHIO, THIS ASSIGNMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS ASSIGNMENT OR THE RIGHTS, DUTIES AND RELATIONSHIP OF THE PARTIES, SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO, EXCLUDING ANY CONFLICTS OF LAW, RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION.

 

Section 4.5             Successors and Assigns .  This Assignment shall be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

 

Section 4.6             Titles and Captions .  All Article or Section titles or captions in this Assignment are for convenience only, shall not be deemed part of this Assignment and in no way define, limit, extend or describe the scope or intent of any provisions hereof.  Except to the extent otherwise stated in this Assignment, references to “Articles” and “Sections” are to Articles and Sections of this Assignment, and references to “Exhibits” are to the Exhibits attached to this Assignment, which are made a part hereof and incorporated herein for all purposes.

 

Section 4.7             Counterparts .  This Assignment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement.

 

Section 4.8             Further Assurances .  Assignor, for itself and its successors and assigns, hereby covenants and agrees that, if this Assignment shall at any time be insufficient in whole or in part to transfer the Treatment Assets to Assignee, at the reasonable request of Assignee, Assignor or its successors or assigns shall take such further actions as are requested and execute any additional documents, instruments or conveyances of any kind which may be reasonably necessary to further effect the transactions contemplated by this Assignment; provided, however, that no such action, document, instrument or conveyance shall increase a party’s liability beyond that contemplated by this Assignment.

 

[Signature Page Follows]

 

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EXECUTED as of the date of the Parties’ acknowledgments below, but effective at the Effective Time.

 

 

	ASSIGNOR :
	ANTERO RESOURCES CORPORATION
	By:
	Name: Alvyn A. Schopp
	Title: Chief Administrative Officer and Regional Vice President
	ASSIGNEE :
	ANTERO TREATMENT LLC
	By:
	Name: Alvyn A. Schopp
	Title: Chief Administrative Officer and Regional Vice President

 

 

Exhibit B

 

Form of Assignment of Water Interest

 

 

FORM OF ASSIGNMENT OF CONTRIBUTED INTERESTS

 

This Assignment (this “ Assignment ”) is made and entered into this [  ] day of September, 2015, by and between Antero Resources Corporation, a Delaware corporation, (the “ Assignor ”), and Antero Midstream Partners LP, a Delaware limited partnership (the “ Assignee ”), and is effective as of October 1, 2015 (the “ Effective Date ”).  Assignor and Assignee are each referred to herein individually as a “ Party ” and collectively as the “ Parties .”

 

Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in that certain Contribution, Conveyance and Assumption Agreement (the “ Contribution Agreement ”), dated as of September 17, 2015, by and among the Assignor, the Assignee and Antero Treatment LLC, a Delaware limited liability company and wholly-owned subsidiary of the Assignee.

 

W I T N E S S E T H:

 

WHEREAS, the Assignor owns all of the outstanding limited liability company interests (the “ Contributed Interests ”) in, and is the sole member of, Antero Water LLC, a Delaware limited liability company (“ Antero Water ”);

 

WHEREAS, pursuant to the Contribution Agreement, Assignor has agreed to contribute, assign, transfer and convey the Contributed Interests, which shall include, without limitation, any and all income, distributions, value, rights, benefits and privileges associated therewith or deriving therefrom (collectively, the “ Conveyed Interests ”) to the Assignee, and the Assignor desires to effect such contribution, assignment, transfer and conveyance;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties do hereby agree as follows:

 

1.                                       Assignment .  Subject to and in accordance with the terms of the Contribution Agreement, and effective as of the Effective Date, the Assignor hereby CONTRIBUTES, ASSIGNS, TRANSFERS AND CONVEYS to the Assignee the Conveyed Interests, free and clear of all Liens (other than restrictions under applicable federal and state securities Laws or under the Organizational Documents of Antero Water), and the Assignee hereby accepts the same.

 

2.                                       Substitution as Member .  From and after the Effective Date, Assignee shall be substituted for Assignor as a member of Antero Water and shall become the sole member of Antero Water.  From and after the Effective Date, Assignor shall cease to be a member of Antero Water and to have or exercise any right or power as a member of Antero Water or with respect to the Conveyed Interests.  The Parties agree that the assignment of the Conveyed Interests, the admission of Assignee as a substitute member of Antero Water and the cessation of Assignor as a member of Antero Water shall not dissolve Antero Water and the business of Antero Water shall continue, notwithstanding any provision of the Organizational Documents of Antero Water to the contrary.

 

 

3.                                    Disclaimer of Warranties .

 

(a)                                  THE ASSIGNOR IS CONVEYING THE CONVEYED INTERESTS WITHOUT REPRESENTATION OR WARRANTY, EXCEPT AS PROVIDED IN THE CONTRIBUTION AGREEMENT.

 

(b)                                  The Assignor and the Assignee agree that the disclaimers contained in Section 3(a) herein, are “conspicuous” disclaimers.  Any covenant implied by statute or law by use of the words “grant,” “contribute,” “transfer,” “assign” or “convey” or any of them are hereby expressly disclaimed, waived, and negated.

 

4.                                    General Provisions .

 

(a)                                  Binding Effect .  This Assignment will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

 

(b)                                  Governing Law .  This Assignment shall be governed by, construed and enforced in accordance with the laws of the State of Colorado without regard to choice of law principles.

 

(c)                                   Consent to Jurisdiction .  The Parties agree that the appropriate, exclusive and convenient forum for any disputes between the Parties arising out of this Assignment shall be in any state or federal court in City and County of Denver, Colorado, and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any proceeding arising out of or related to this Assignment. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Assignment in any court or jurisdiction other than the above specified courts.

 

(d)                                  Amendment and Modification .  This Assignment may be amended, modified or supplemented only by written agreement of the Parties.

 

(e)                                   Waiver of Compliance .  Any failure of any Party to comply with any obligation, covenant, agreement or condition in this Assignment may be waived by the Party entitled to the benefits thereof only by a written instrument signed by the Party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure, nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.

 

(f)                                    No Third Party Rights .  This Assignment shall be binding upon and inure solely to the benefit of the Parties and their respective successors and permitted assigns, and none of the provisions of this Assignment shall be for the benefit of or enforceable by any third party, including any creditor of any Party or any of their Affiliates.  No such third party shall obtain any right under any provision of this Assignment or shall by

 

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reasons of any such provision make any claim in respect of any liability (or otherwise) against any other Party.

 

(g)                                   Entire Agreement . This Assignment, together with the Contribution Agreement and the other Transaction Documents, constitute the entire agreement and understanding of the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both oral and written, between the Parties with respect to such subject matter.  In the event of a conflict or inconsistencies between the terms and conditions of this Assignment and the Contribution Agreement, the terms and conditions of the Contribution Agreement shall control.

 

(h)                                  Counterparts . This Assignment may be executed in one or more counterparts, including electronic, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

[ Signature page follows ]

 

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IN WITNESS WHEREOF, this Assignment has been duly executed by each of the Parties as of the date and year first above written.

 

	ASSIGNOR:
	ANTERO RESOURCES CORPORATION
	By:
	Name:
	Title:
	ASSIGNEE:
	ANTERO MIDSTREAM PARTNERS LP
	By: Antero Resources Midstream Management LLC, its general partner
	By:
	Name:
	Title:

 

SIGNATURE PAGE TO ASSIGNMENT

 

 

Exhibit C

 

Form of Water Services Agreement

 

 

WATER SERVICES AGREEMENT

 

BY AND BETWEEN

 

ANTERO RESOURCES CORPORATION

 

AND

 

ANTERO WATER LLC

 

DATED AS OF

 

[                        ], 2015

 

 

TABLE OF CONTENTS

 

ARTICLE 1	DEFINITIONS	1
ARTICLE 2	PRODUCER COMMITMENTS	10
Section 2.1	Producer Commitments	10
Section 2.2	Conflicting Commitments	10
Section 2.3	Covenant Running with the Land	10
Section 2.4	Additional Oil and Gas Interests or Water Facilities	11
ARTICLE 3	SERVICES	13
Section 3.1	Antero Water Service Commitment	13
Section 3.2	Priority of Fluid Handling Services	15
ARTICLE 4	FRESH WATER SYSTEM EXPANSION AND CONNECTION OF FRESH WATER DELIVERY POINTS	15
Section 4.1	Development Plan; Fresh Water Facilities Plan; Exchange and Review of Information	15
Section 4.2	Expansion of Fresh Water System; Connection of Well Pads	16
Section 4.3	Installation and Operation of High-Rate Transfer Facilities	19
Section 4.4	Take Points	20
Section 4.5	Retention Facilities	20
Section 4.6	Pumping Facilities	21
Section 4.7	Cooperation	21
ARTICLE 5	CERTAIN PROVISIONS REGARDING WASTE WATER SERVICES	21
Section 5.1	Access to Produced Water Receipt Points and Other Waste Water Sites	21
Section 5.2	Dispatch Procedures	21
Section 5.3	Treatment Facility; Designated Receiving Facilities	22
Section 5.4	Transportation Services Equipment	23
Section 5.5	Contract Carrier Status	23
ARTICLE 6	TERM	23
Section 6.1	Term	23
ARTICLE 7	FEES AND CONSIDERATION	23
Section 7.1	Fees	23
Section 7.2	Minimum Daily Fresh Water Volume Commitment	29
ARTICLE 8	CERTAIN RIGHTS AND OBLIGATIONS OF PARTIES	30
Section 8.1	Operational Control of Antero Water’s Facilities	30
Section 8.2	Maintenance	30
Section 8.3	Right of Way and Access	30
Section 8.4	Third Party Services; Capacity Allocations on the Fresh Water System	31
Section 8.5	Governmental Approvals; Compliance with Applicable Law	32

 

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ARTICLE 9	FRESH WATER DELIVERY RATES	33
Section 9.1	Fresh Water Delivery Rates	33
Section 9.2	Producer Facilities	33
ARTICLE 10	FRESH WATER NOMINATION	33
Section 10.1	Maximum Take Point Volumes	33
Section 10.2	Fresh Water Delivery Nominations	33
Section 10.3	Changes in Fresh Water Delivery Rates	33
ARTICLE 11	FRESH WATER AVAILABILITY AND QUALITY; WASTE WATER QUALITY	33
Section 11.1	Fresh Water Availability	33
Section 11.2	Take Point Fresh Water Standards	34
Section 11.3	Non-Conforming Take Point Fresh Water	34
Section 11.4	Delivery Point Fresh Water Quality Standards	34
Section 11.5	Retention Facility Contamination	34
Section 11.6	Non-Conforming Waste Water	35
ARTICLE 12	MEASUREMENT EQUIPMENT AND PROCEDURES	35
Section 12.1	Measurement Equipment	35
Section 12.2	Notice of Measurement Facilities Inspection and Calibration	36
Section 12.3	Measurement Accuracy Verification	36
Section 12.4	Special Tests	36
Section 12.5	Metered Flow Rates in Error	37
Section 12.6	Waste Water Measurement	37
Section 12.7	Units of Measurement	37
Section 12.8	Record Retention	37
ARTICLE 13	NOTICES	38
Section 13.1	Notices	38
ARTICLE 14	PAYMENTS	39
Section 14.1	Invoices	39
Section 14.2	Right to Suspend on Failure to Pay	40
Section 14.3	Audit Rights	40
Section 14.4	Payment Disputes	40
Section 14.5	Interest on Late Payments	40
Section 14.6	Credit Assurance	40
ARTICLE 15	FORCE MAJEURE	41
Section 15.1	Suspension of Obligations	41
Section 15.2	Definition of Force Majeure	41
Section 15.3	Settlement of Strikes and Lockouts	42
Section 15.4	Payments for Services Performed	42

 

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ARTICLE 16	INDEMNIFICATION	42
Section 16.1	Antero Water	42
Section 16.2	Producer	43
ARTICLE 17	CUSTODY AND TITLE	43
Section 17.1	Custody of Fresh Water	43
Section 17.2	Custody of Waste Water	44
Section 17.3	Title to Waste Water	44
ARTICLE 18	PAYMENTS FOR FRESH WATER; TAXES	44
Section 18.1	Payments for Fresh Water; Taxes	44
ARTICLE 19	MISCELLANEOUS	45
Section 19.1	Rights	45
Section 19.2	Applicable Laws	45
Section 19.3	Governing Law; Jurisdiction	45
Section 19.4	Successors and Assigns	45
Section 19.5	Severability	46
Section 19.6	Confidentiality	47
Section 19.7	Entire Agreement, Amendments and Waiver	48
Section 19.8	Limitation of Liability	48
Section 19.9	Headings	49
Section 19.10	Rights and Remedies	49
Section 19.11	No Partnership	49
Section 19.12	Rules of Construction	49
Section 19.13	No Third Party Beneficiaries	50
Section 19.14	Further Assurances	50
Section 19.15	Counterpart Execution	50
Section 19.16	Memorandum of Agreement	50

 

Exhibit A	Initial Service Area
Exhibit B	Initial Fresh Water Facilities
Exhibit C	Take Points
Exhibit D	Initial Development Plan
Exhibit E	Initial Fresh Water Facilities Plan
Exhibit F	Form of Connection Notice
Exhibit G	Deemed Connection Notices
Exhibit H	Cost of Service Fee
Exhibit I	Assumed Subcontracts
Exhibit J	Memorandum of Agreement

 

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WATER SERVICES AGREEMENT

 

This Water Services Agreement (this “ Agreement ”), dated as of [                        ], 2015 (the “ Effective Date ”), is by and between ANTERO RESOURCES CORPORATION , a Delaware corporation (“ Producer ”), and ANTERO WATER LLC , a Delaware limited liability company (“ Antero Water ”).  Producer and Antero Water may be referred to herein individually as a “ Party ” or collectively as the “ Parties .”

 

RECITALS

 

A.                                     Producer owns Oil and Gas Interests and intends to drill and complete Wells for the production of Hydrocarbons in the Initial Service Area and may from time to time own Oil and Gas Interests and may drill and complete Wells for the production of Hydrocarbons in other areas.

 

B.                                     Producer requires supplies of Fresh Water in its areas of operation for hydraulic fracturing operations and other purposes and has the right to take Fresh Water from various rivers and other Fresh Water sources to use for such purposes in its operations in the Initial Service Area and may from time to time have rights to take Fresh Water from other sources for such operations and operations in other areas.

 

C.                                     Antero Water has acquired from Producer certain Fresh Water Facilities, which Producer has been using to take Fresh Water from its Fresh Water sources and to make available such Fresh Water to Wells in its areas of operation in the Initial Service Area, including certain related assets.  Antero Water anticipates the expansion of the Fresh Water Facilities to make available Fresh Water to additional locations in the Initial Service Area and other areas.

 

D.                                     Antero Water has also acquired from Producer certain contracts and other assets that Producer has been using (or expects that Antero Water will use in the future) in connection with the collection of Produced Water produced from Wells in the Initial Service Area and Other Waste Water generated or collected at the Well Pads or from Producer’s property adjacent to any Well Pad in the Initial Service Area and the transportation, treatment, disposal, recycling, and/or sale of such Produced Water and Other Waste Water. Antero Water may in the future enter into additional contracts and/or acquire additional assets for the purpose of carrying out such activities in the Initial Service Area and other areas.

 

E.                                      Producer desires to contract with Antero Water for Antero Water to provide the Fluid Handling Services in the Service Area, and Antero Water desires to provide the Fluid Handling Services to Producer, in each case in accordance with the terms and conditions of this Agreement.

 

NOW THEREFORE, in consideration of the premises and mutual covenants set forth in this Agreement, the Parties agree as follows:

 

ARTICLE 1
DEFINITIONS

 

Capitalized terms used, but not otherwise defined, in this Agreement shall have the respective meanings given to such terms set forth below:

 

1

 

Adequate Assurance of Performance .  As defined in Section 14.6(a) .

 

Affiliate .  Any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with another Person.  Affiliated shall have the correlative meaning.  The term “control” (including its derivatives and similar terms) shall mean possessing the power to direct or cause the direction of the management and policies of a Person, whether through ownership, by contract, or otherwise.  Notwithstanding the foregoing, for purposes of this Agreement, none of Antero Midstream Partners LP, Antero Resources Midstream Management LLC, or any of their respective direct or indirect subsidiaries (including Antero Water) shall be an Affiliate of Producer, and neither Producer nor any of its direct or indirect subsidiaries (other than Antero Midstream Partners LP and its direct and indirect subsidiaries) shall be an Affiliate of Antero Water.

 

Agreement .  As defined in the preamble hereof.

 

Antero Treatment .  Antero Treatment LLC.

 

Antero Water .  As defined in the preamble of this Agreement.

 

Antero Water Group .  As defined in Section  16.2(b) .

 

Applicable Law .  Any applicable law, statute, regulation, rule, code, administrative order or enforcement action (whether national, local, municipal, territorial, provincial, or federal and including common law) of any Governmental Authority, including any Environmental Law, to the extent they apply to the Fluid Handling Services or the Parties.

 

Assumed Subcontracts .  As defined in Section 7.1(b) .

 

AST .  An above-ground storage tank.

 

Attributable Produced Water .  Produced Water produced from a Well operated by Producer located on the Service Area Properties and attributable to either (i) Producer’s interest in such Well or (ii) the interest of non-operating parties in such Well, to the extent that Producer (as operator) has the right to dispose of, and is responsible for the disposition of, such Produced Water.

 

Barrel .  Forty-two Gallons.

 

Baseline Components .  As defined in Section 7.1(e) .

 

Business Day .  Any calendar Day that commercial banks in New York City are open for business.

 

Chemicals Baseline .  As defined in Section 7.1(d) .

 

Completion Deadline .  As defined in Section 4.2(b) .

 

Connection Notice .  As defined in Section 4.2(b) .

 

Confidential Information .  As defined in Section 19.6(a) .

 

2

 

Conflicting Commitment .  Any agreement, commitment or arrangement that would require Producer to use Fresh Water delivered by any Person other than Antero Water to a Well in Producer’s hydraulic fracturing operations on such Well or to deliver Attributable Produced Water or Other Waste Water to any Person other than Antero Water for gathering, collection, transportation, processing, treatment, recyclying, re-sale, or other disposal or disposition.

 

Contract Year .  Each of (i) the period from the Effective Date to the last Day of the Month in which the first anniversary of the Effective Date occurs and (ii) each period of twelve (12) Months thereafter.

 

Contribution Agreement .  As defined in Section 15.2 .

 

Cost of Service Fee .  As defined in Section 7.1(j) .

 

CPI .  As defined in Section 7.1(f) .

 

CS Facility .  As defined in Section 7.1(j) .

 

Day .  A period commencing at 10:00 a.m., Eastern Standard Time, on a calendar day and ending at 10:00 a.m., Eastern Standard Time, on the next succeeding calendar day.  Daily shall have the correlative meaning.

 

Delivery Point Fee .  As defined in Section 7.1(a)(i) .

 

Designated Receiving Facility .  As defined in Section 5.3 .

 

Development Plan .  As defined in Section 4.1(a) .

 

Effective Date .  As defined in the preamble of this Agreement.

 

Electricity Baseline .  As defined in Section 7.1(d) .

 

Environmental Laws .  All Applicable Laws pertaining to the presence or release of environmental contaminants (including any Hazardous Materials), or relating to natural resources (including any protected species) or the environment (including the air, water, surface or subsurface of the ground) as same are in effect at any time and including the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), as amended by Superfund Amendments and Reauthorization Act (“SARA”), 42 U.S.C. §§ 9601 et seq.; Resource Conservation and Recovery Act (“RCRA”), as amended by the Solid Waste Disposal Act (“SWDA”), 42 U.S.C. §§6901 et seq.; Federal Water Pollution Control Act (“FWPCA”), as amended by the Clean Water Act (“CWA”), 33 U.S.C. §§ 1251 et seq.; Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.; Clean Air Act (“CAA”), 42 U.S.C., §§ 7401 et seq.; and Toxic Substances Control Act (“TSCA”), 15 U.S.C., §§ 2601 et seq., as each are amended from time to time, and any similar state or local enactments by Governmental Authorities.

 

Fair Market Value .  With respect to any asset, the price that would be paid by a willing buyer of such asset to a willing seller, as determined by an independent nationally known investment banking firm selected by Antero Water and reasonably acceptable to Producer.

 

3

 

Firm Service .  Fluid Handling Services that are accorded the highest priority on the Water Facilities with respect to capacity allocations, interruptions, or curtailments, specifically including the Fresh Water Services provided to Producer hereunder.  Firm Services will be the last curtailed on the relevant part of the Water Facilities in the event of an interruption or curtailment, and all Firm Services will be treated equally in the event an allocation is necessary.

 

Fluid Handling Services .  As defined in Section 3.1 .

 

Force Majeure .  As defined in Section 15.2 .

 

Fresh Water .  Either (i) raw fresh water or (ii) a mixture of raw fresh water and Treated Waste Water.

 

Fresh Water Delivery Point .  With respect to each Well Pad, the water inlet flange of the working tanks or the hydration unit located at or in the vicinity of such Well Pad being utilized by Producer and its other contractors in hydraulic fracturing operations on a Well on such Well Pad.

 

Fresh Water Delivery Rate .  With respect to each Well Pad, the rate at which Fresh Water is to be delivered by Antero Water from the Fresh Water System to the Fresh Water Delivery Point at such Well Pad, which rate is specified by Producer in the Connection Notice for such Well Pad and is subject to modification pursuant to Section 10.3 .

 

Fresh Water Facilities .  Collectively, the Fresh Water System and the High-Rate Transfer Facilities, including the Fresh Water facilities described in Exhibit B being acquired by Antero Water from Producer as of the date hereof (including any Fresh Water assets included in the Water Assets, as such term is defined in the Contribution Agreement), including any additional System Segments constructed after the date hereof, as such Fresh Water facilities are expanded after the date hereof.  The Fresh Water Facilities do not include any Fresh Water Delivery Point or facilities at the Well Pads downstream of the Fresh Water Delivery Points, all of which facilities shall be owned and operated by Producer or its subcontractors.

 

Fresh Water Facilities Plan .  As defined in Section 4.1(b) .

 

Fresh Water Measurement Point .  The inlet to Antero Water’s Measurement Facilities located at the inlet to the High-Rate Transfer Facilities located at or in the vicinity of each Well Pad.

 

Fresh Water Quality Standards .  As defined in Section 11.2 .

 

Fresh Water Services .  Those Fluid Handling Services that are described in Section 3.1(a)  through Section 3.1(e) .

 

Fresh Water System .  Fresh Water facilities of Antero Water and its subcontractors upstream of the interconnection with the High-Rate Transfer Facilities, including, in each case, to the extent now in existence or constructed or installed in the future, all Fresh Water pipelines, System Retention Facilities, System Pumping Stations, Take Point Facilities, Measurement Facilities, rights of way (whether for underground or surface use), fee parcels, surface rights, and permits, and all appurtenant facilities.  The Fresh Water System is used to take Fresh Water from

 

4

 

the Take Points to the Well Pads, where such Fresh Water is transferred through the High Rate Transfer Facilities to the Fresh Water Delivery Points.

 

Fuel Gas .  As defined in Section 7.1(d).

 

Gallon .  One U.S. gallon, which is equal to 231 cubic inches.

 

Gas .  Any mixture of gaseous hydrocarbons, consisting essentially of methane and heavier hydrocarbons and inert and noncombustible gases, that is extracted from beneath the surface of the earth.

 

Gas Baseline .  As defined in Section 7.1(d) .

 

Governmental Approval .  Any permit, license, consent, clearance, certificate, approval, authorization or similar document or authority which any Applicable Law or Governmental Authority requires either Party to hold or obtain in order for the Fluid Handling Services to be performed, including any that are required to take Fresh Water from the Take Points.

 

Governmental Authority .  Any federal, state, local, municipal, tribal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental tribunal, including any tribal authority having or asserting jurisdiction.

 

Hazardous Materials .  Collectively, (i) materials defined as “hazardous substances”  in CERCLA, or any successor statute, unless such term has been given broader meaning by laws, regulations, rules, orders, ordinances, requirements or determinations of any Governmental Authority having jurisdiction with respect to the Fluid Handling Services or the Parties (including Governmental Authorities establishing common law liability), in which case such broader meaning shall apply; (ii) materials defined as “hazardous wastes” in RCRA, or any successor statute, unless such term has been given broader meaning by laws, regulations, rules, orders, ordinances, requirements or determinations of any Governmental Authority having jurisdiction with respect to the Fluid Handling Services or the Parties (including Governmental Authorities establishing common law liability), in which case such broader meaning shall apply; (c) any Hydrocarbons, Produced Water , petroleum or petroleum produce; (d) any polychlorinated biphenyl; and (e) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance, including naturally occurring radioactive material, regulated under or within the meaning of any applicable Environmental Law.

 

High-Rate Transfer Facilities .  Facilities of Antero Water and its subcontractors located at or in the vicinity of a Well Pad used to perform High-Rate Transfer Services at such Well Pad, including, as applicable, ASTs, treated water offload tanks, high-rate transfer pumps, associated hoses and lines, and all related equipment and facilities used to transfer Fresh Water from the Fresh Water System to the Fresh Water Delivery Points at the Fresh Water Delivery Rate.

 

High-Rate Transfer Services .  As defined in Section 3.1(e) .

 

Hydrocarbons .  Gas and/or Liquid Hydrocarbons.

 

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Initial Development Plan .  The Development Plan attached hereto as Exhibit D .

 

Initial Service Area .  The area described in Exhibit A hereto.

 

Interruptible Service .  Fluid Handling Services that are accorded the lowest priority on the Water Facilities with respect to capacity allocations, interruptions, or curtailments.  Interruptible Service will be the first curtailed on the relevant part of the Water Facilities in the event of an interruption or curtailment.

 

Landfill Credit .  As defined in Section 7.1(c) .

 

Liquid Hydrocarbons .  Oil, condensate, natural gasoline and all the liquid hydrocarbon production from wells, or a blend of such.

 

Maintenance .  As defined in Section 8.2 .

 

Measurement Facilities .  Any facility or equipment used to measure the volume of Fresh Water, which may include meter tubes, isolation valves, tank strappings, recording devices, communication equipment, buildings and barriers.

 

Minimum Annual Fresh Water Volume Commitment .  An aggregate volume of Fresh Water in the applicable calendar year equal to the number of Days in such calendar year multiplied by the Minimum Daily Fresh Water Volume Commitment with respect to such calendar year.

 

Minimum Daily Fresh Water Volume Commitment .  With respect to each of calendar years 2016 through 2019, inclusive, the volume of Fresh Water, in Barrels per Day, set forth beside such calendar year in the following table:

 

2016		90,000 Barrels per Day
2017		100,000 Barrels per Day
2018		120,000 Barrels per Day
2019		120,000 Barrels per Day

 

Minimum Quarterly Fresh Water Volume Commitment .  An aggregate volume of Fresh Water in the applicable calendar quarter equal to the number of Days in such calendar quarter multiplied by the Minimum Daily Fresh Water Volume Commitment with respect to the calendar year in which such calendar quarter falls.

 

Month .  A period commencing at 10:00 a.m., Eastern Standard Time, on the first Day of a calendar month and extending until 10:00 a.m., Eastern Standard Time, on the first Day of the next succeeding calendar month.  Monthly shall have the correlative meaning.

 

MVC Credit Volumes .  With respect to each calendar year from 2016 through 2019, inclusive, or any calendar quarter in any such calendar year, as applicable, the sum of (i) the aggregate number of Barrels of Fresh Water delivered to the Fresh Water Delivery Points under

 

6

 

this Agreement during such calendar year or calendar quarter, as applicable, plus (ii) if Antero Water fails to deliver Fresh Water to the Fresh Water Delivery Points when required to do so under this Agreement, including if such failure is excused by an event of Force Majeure (but, for the avoidance of doubt, not including Producer’s inability to receive or utilize Fresh Water as a result of an event of Force Majeure), the aggregate number of additional Barrels of Fresh Water that would have been delivered to the Fresh Water Delivery Points during such calendar year or calendar quarter, as applicable, if Antero Water had delivered such Fresh Water when required to do so.

 

Off-Site Tanks .  Tanks located downstream from a Well Pad where Produced Water that is entrained in Hydrocarbons and becomes separated from such Hydrocarbons downstream of a Well Pad is held pending collection, gathering, and/or disposal.

 

Oil and Gas Interests .  Oil and gas leasehold interests and oil and gas mineral fee interests, including working interests, overriding royalty interests, net profits interests, carried interests, and similar rights and interests.

 

Other Waste Water .  Waste water other than Produced Water that is generated from Producer’s operations at Well Pads or that collects at the Well Pads or on Producer’s property adjacent to the Well Pads, and including in each case all materials (including Hydrocarbons) contained in such water.

 

Parties .  As defined in the preamble of this Agreement.

 

Party .  As defined in the preamble of this Agreement.

 

Person .  An individual, a corporation, a partnership, a limited partnership, a limited liability company, an association, a joint venture, a trust, an unincorporated organization, or any other entity or organization, including a Governmental Authority.

 

Planned Well .  As defined in Section 4.1(a) .

 

Planned Well Pad .  As defined in Section 4.1(a) .

 

Previous Year Credit .  An amount with respect to each of calendar years 2017 through 2019, inclusive, equal to the excess, if any, of (1) the aggregate of the MVC Credit Volumes for the previous calendar year multiplied by the applicable Delivery Point Fee in effect on the last Day of such previous calendar year over (2) the product of the Projected Fresh Water Volumes for such previous calendar year multiplied by Weighted Delivery Point Fee in effect on the last Day of such previous calendar year.  If there is no such excess, the Previous Year Credit shall be zero.

 

Produced Water .  Water produced from Wells alongside Hydrocarbons, including (i) water separated from Hydrocarbons at the wellhead upstream of a Produced Water Receipt Point located at a Well Pad through conventional mechanical separation equipment and held in tanks owned by Producer at the Well Pad, including flowback water, drilling fluids, and other fluid wastes produced from such Wells, and (ii) water entrained in Hydrocarbons that separates from such Hydrocarbons downstream of a Well Pad that a third party is not responsible for collecting,

 

7

 

gathering, and/or disposing of and that is held in Off-Site Tanks, and including in each case all materials (including Hydrocarbons) contained in such water.

 

Produced Water Receipt Point .  The outlet flange of the Producer’s Produced Water tankage located at or nearby or assigned to a Well, downstream of the Producer’s separation equipment, or the outlet flange of an Off-Site Tank.

 

Producer .  As defined in the preamble of this Agreement.

 

Producer Group .  As defined in Section 16.1(b) .

 

Projected Fresh Water Volumes .  An aggregate volume of Fresh Water in the applicable calendar year equal to the number of Days in such calendar year multiplied by the number of Barrels per Day set forth beside such calendar year in the following table:

 

2016		126,000 Barrels per Day
2017		142,000 Barrels per Day
2018		203,000 Barrels per Day

 

Quarterly MVC Shortfall Fee .  As defined in Section 7.2(a) .

 

Reimbursable Landfill Costs .  As defined in Section 7.1(c) .

 

Reimbursable Waste Water Services Costs .  As defined in Section 7.1(a)(vii) .

 

Required Pumping Station .  As defined in Section 4.6 .

 

Required Retention Facility .  As defined in Section 4.5 .

 

Retention Facility .  Each retention area, impoundment, or other similar facility used to temporarily store Fresh Water upstream of the High Rate Transfer Facilities.

 

Service Area .  The Initial Service Area and any other area that becomes part of the Service Area pursuant to Section 2.4 .

 

Service Area Properties .  All Oil and Gas Interests now owned or hereafter acquired by Producer and located wholly or partly within the Service Area or pooled, unitized or communitized with Oil and Gas Interests located wholly or partly within the Service Area; provided that Service Area Properties shall not include any Oil and Gas Interests that are unitized or pooled with the properties of third parties that are not Service Area Properties if Producer is not the operator of such unit.

 

Specified Fee .  As defined in Section 7.1(h) .

 

System Pumping Station .  As defined in Section 4.6 .

 

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